Why deal structure can make or break your transaction

In today’s M&A landscape, structure matters more than ever. With uncertainty In the economy, cautious lenders, and a more risk adverse buyers, many deals no longer close with 100% cash at closing. Structured offers, including seller notes, earnouts, and equity rollovers, have become increasingly common, especially when there’s a gap between seller expectations and what buyers are willing to pay.

But while structure can bridge that gap, it can also create risk. The key is understanding what you’re agreeing to before signing a letter of intent (LOI).

How Structure Influences Value

Sellers often expect to be paid for the future upside they’ve worked hard to create. Buyers, on the other hand, usually want to pay based on past performance. That mismatch often results in a valuation gap. Instead of walking away, many deals get done by using structured elements, but only if both sides are aligned on the details.

Earnouts, seller financing, and equity rollovers can be useful tools, but they must be clearly defined and carefully negotiated.

Key Considerations When Evaluating Structure

•Trust but verify: If a buyer offers a significant earnout or seller note, ask for references from other sellers who’ve worked with them.
Get specific in the LOI: Clearly outline how any earnout will be calculated, what metrics need to be hit, and over what timeframe.
•Understand where the money comes from: Is the earnout based on Gross Margin, EBITDA, or revenue? And where will that money come from post-close to pay it?
•Stay close to the business: Some sellers stay on running the business or in a consulting role with a of equityto protect their upside and support performance.

Why the LOI is More Important Than You Think

Many sellers underestimate how much of the deal gets defined at the LOI stage. Waiting to hash out critical details until the purchase agreement stage can lead to deal fatigue, misalignment between the Buyer and Seller, or worse a broken deal. Clarity in the LOI helps avoid potential disputes and sets the tone for a smoother transaction.

Final Thoughts

Deal structure is not just about creative financing. It’s about protecting your interests, setting clear expectations, and avoiding surprises. At Osage Advisors, we help clients navigate these conversations early so they can make informed decisions about who to work with and how to structure the best deal possible.

Because the highest offer on paper doesn’t always lead to the best result. Structure, when done right, creates confidence for both sides and ultimately, a better outcome.

Certain Members of Osage Advisors are Registered Representatives of and conduct securities transactions through StillPoint Capital, LLC, Tampa, FL. Osage and StillPoint are not affiliated.

Osage Advisors provides a lot of guidance in the M&A market here on our blog and on our YouTube channel and Podcast.