At George & Company, we’ve structured and closed deals across every industry imaginable for over 45 years—from simple cash transactions to complex middle-market arrangements. Deal structure is the art of balancing seller proceeds, buyer risk, tax efficiency, and transition success. The right structure aligns incentives, bridges valuation gaps, and gets deals across the finish line. Below, we outline the primary options, their mechanics, and when they make sense.
All-Cash Deal
The cleanest structure: buyer pays the full purchase price at closing, typically via wire transfer or cashier’s check. No contingencies beyond standard representations and warranties.
- Pros for sellers: Immediate liquidity, minimal post-closing involvement, low risk.
- Pros for buyers: Full control from day one, no ongoing seller obligations.
- When it works: Bankable businesses (strong financials, recurring revenue) bought by strategic acquirers or well-capitalized individuals. Common in seller’s markets or for “must-have” targets.
- George & Company insight: All-cash deals often trade at a slight discount to total consideration because buyers factor in their financing limits. We push for the highest headline price while ensuring clean title transfer.
Asset Sale
Buyer purchases specific assets (equipment, inventory, customer lists, goodwill) rather than the entity itself. Seller retains the legal entity and any unwanted liabilities.
- Key mechanics: Purchase price allocated across asset classes (affects taxes—goodwill gets capital gains treatment, inventory often ordinary income).
- Pros for buyers: Step-up in basis for depreciation/amortization, cleaner balance sheet, liability avoidance.
- Pros for sellers: Often simpler for pass-through entities (LLCs, S-corps); avoids corporate-level tax.
- Challenges: Contracts may not transfer without consent; higher seller tax rates on certain assets.
- George & Company insight: We negotiate allocation schedules favoring capital gains (goodwill, covenants) while keeping buyers happy. Essential for deals under $5M where SBA financing is involved.
Stock Sale
Buyer acquires 100% of the seller’s stock or membership interests, taking the entire entity “as is.”
- Pros for sellers: Generally lower taxes (long-term capital gain on stock); contracts and licenses transfer automatically.
- Pros for buyers: Continuity of operations, but they inherit all historical liabilities.
- When it works: Larger deals where buyer wants operational continuity; seller has clean books and minimal legacy issues.
- George & Company insight: Buyers demand robust indemnification and escrow holdbacks. We structure representations & warranties insurance to reduce friction in middle-market stock deals.
Seller Financing (Note)
Seller acts as lender for part of the purchase price, typically 10–40% of total consideration, repaid over 3–7 years with interest.
- Mechanics: Promissory note secured by business assets; often paired with personal guarantees or real estate collateral.
- Pros for sellers: Higher total price (buyers pay premium for financing); interest income; tax deferral via installments.
- Pros for buyers: Lower bank debt requirements; shows seller confidence in business viability.
- George & Company insight: Critical in Main Street deals (under $2M). We cap note at 30% of price, tie payments to cash flow, and include default protections. Stats show seller-financed deals close 2x faster.
Earn-Out
Portion of price (often 10–30%) paid post-closing only if business hits future revenue/EBITDA targets.
- Mechanics: Clear, measurable metrics; 1–3 year window; caps and floors protect both sides.
- Pros for sellers: Bridges valuation gaps; keeps “skin in the game.”
- Pros for buyers: Aligns seller incentives during transition; pays only for proven performance.
- Risks: Disputes over metrics; seller walks away if targets missed.
- George & Company insight: Best for high-growth businesses where projections drive value. We insist on buyer-controlled metrics with mutual audit rights and minimum guarantees.
Equity Rollover
Seller retains 10–40% equity in new entity, “rolling” it forward instead of cashing out fully.
- When it works: Strategic sales to PE or serial entrepreneurs; seller stays involved operationally.
- Pros: Upside participation; tax deferral until future liquidity event.
- George & Company insight: Common in middle-market PE deals ($5M+ EBITDA). We negotiate tag-along rights, board seats, and guaranteed minimum value to protect sellers.
Putting It Together: Hybrid Structures Rule
Most deals blend 2–3 elements: 50% bank debt, 20% seller note, 20% earn-out, 10% equity rollover. At George & Company, we model after-tax proceeds across structures before LOI, ensuring alignment with your personal goals (retirement, legacy, philanthropy). We also coordinate with your CPA and attorney to optimize tax treatment while keeping the deal buyer-friendly.
Experience matters here. Our team has seen every structure succeed and fail, across cycles and industries. The goal isn’t the flashiest term sheet—it’s the one that funds your next chapter with confidence.