Two offers with the same headline can be very different deals. The difference lives in how, and when, the money is actually paid. Here is the plain-English version.
The headline price is one number. The deal is really four: what arrives at completion, what is deferred, what is conditional, and what is held back just in case. Understanding the difference is the single best protection you can take into a negotiation.
The portion wired on the day. At this size of business, a credible offer typically puts half or more of the price in cash at completion. This is the only part of any offer that is certain, so weigh it accordingly.
A fixed amount paid later, on dates or milestones agreed in the contract. Deferral is not a trick; it is how buyers keep everyone accountable through the handover years, and it is reasonable when the milestones are clear, achievable and largely within your control. The test: could a sensible person look at the milestone and say definitively whether it was met?
The conditional part: extra payment if the business hits agreed performance targets. Earn-outs close gaps between your price and the buyer’s, and they can genuinely pay out, but they deserve scrutiny. Three questions before you accept one: Is the metric one you influence? Who controls the decisions that drive it during the earn-out period? And what happens if the business is sold again before the period ends?
A slice of the price held by a neutral third party for a fixed period after completion, as cover for the warranties you give about the state of the business. Standard, sensible and nothing to fear if your disclosures are honest: typical at this size is a modest percentage held for six to eighteen months, then released. Push back on anything open-ended.
Sort every pound of each offer into three buckets: certain, likely and hoped-for. Compare the certain buckets first, then the likely ones, and treat the hoped-for bucket as upside rather than price. The best offer is rarely the biggest headline; it is the one with the most money in the first two buckets from a buyer who completes.
Tatu partners with the owners of UK service businesses making £500k to £3m a year in profit: money out today, a meaningful stake kept, and a bigger sale built together. See how it works, try the free valuation estimate, or write to nico@tatu-capital.com.