How Deferred Consideration Works in M&A Transactions
How Deferred Consideration Works in M&A Transactions Quick Answer Deferred consideration is a payment structure where the buyer pays part of the purchase price later, contingent on future performance metrics like revenue or EBITDA targets, allowing buyers to mitigate risk while giving sellers potential upside and higher total compensation. Common forms include holdbacks (cash withheld […]
What is a Material Adverse Change Clause?
What is a Material Adverse Change Clause? Quick Answer A Material Adverse Change (MAC) or Material Adverse Effect (MAE) clause is a legal provision that allows parties to reassess or terminate a deal if a severe, lasting event significantly undermines the target company’s value or ability to meet contractual obligations between signing and closing. Courts […]
Consulting Agreements After Selling Your Business: 6 Terms to Negotiate
Post-close consulting agreements (typical: 6-24 months at $200-$500/hour). The 6 terms to negotiate: hours, scope, term length, non-compete tie-in, and exit triggers.
Milestone Payments Explained
How milestone payments and earnouts work in M&A: revenue/EBITDA targets, measurement periods, manipulation risks. 76+ buyers, no fees, free calculator, no contract.
Understand the Net Working Capital Peg in M&A Deals
Understand the Net Working Capital Peg in M&A Deals Quick Answer A net working capital peg is a closing-day benchmark that ties the buyer’s final purchase price to the actual current assets minus current liabilities (excluding cash and debt) delivered at closing. The peg, typically negotiated in the LOI, creates a dollar-for-dollar adjustment mechanism: if […]
Purchase Agreement or Letter of Intent: Which is Right for You?
Purchase Agreement or Letter of Intent: Which is Right for You? Quick Answer A letter of intent is a short, usually non-binding document (3-8 pages) that signals buyer interest, locks in price and basic terms, and grants exclusivity during a 60-120 day due diligence period. A purchase agreement is the final, legally binding contract drafted […]
Seller Notes in Business Sales: When They Make Sense
Seller Notes in Business Sales: When They Make Sense Quick Answer A seller note is a promissory note where a business owner accepts a portion of the purchase price as scheduled debt payments rather than cash at closing, typically representing around 21% of the sale price in technology deals. They work best when a buyer […]
How Working Capital Adjustments Work at Closing (With Worked Example)
Working capital peg vs. actual at close can move $250k-$2M between buyer and seller. The formula, the dispute mechanics, and the 3 traps that catch first-time sellers.
How Escrow Works in a Business Sale
How Escrow Works in a Business Sale Quick Answer Escrow in a business sale is a neutral third-party arrangement where an impartial agent holds funds and documents until all contractual conditions are met, then releases them to both parties. This protects buyers and sellers by reducing execution risk, keeping capital secure, and providing objective verification […]