Small Business Deal Structure

Structuring Business Deals

Business buyers and business sellers must negotiate each component of a deal to come up with an optimum deal structure for both parties. Usually the negotiations are completed with the assistance of a business broker. Once the deal structure is negotiated the terms of the deal are formalized in a purchase agreement which is legally binding. The purchase agreement must be prepared by a lawyer (solicitor) and is signed by both parties.

Typical Deal Financing Structures

Deal Size Close at Cash Seller Financing Mezzanine
Seller Retained
Earn Out Other
<500K 70% - 80% 15% - 25% 0% 0% 0% 0% - 5%
$ 500K - $ 999K 50% - 60% 15% - 25% 0% - 10% 0% - 10% 0% 10% - 15%
$ 1 MM - $ 2 MM 50% - 60% 15% - 25% 5% - 10% 0% - 5% 5% - 10% 15% - 20%
$ 2 MM - $ 5 MM 50% - 60% 10% - 20% 5% - 10% 0% - 5% 5% - 10% 10% - 15%
$ 5 MM+ 55% - 65% 0% - 10% 0% - 5% 5% - 15% 10% - 15% 15% - 20%
Cash at Close

Down payment or cash received by the business seller when a business deal closes.

Seller Financing

Seller Financing is a loan provided by the business seller to the business buyer. It is similar to a bank loan. The seller makes a down payment and pays the remainder of the loan in monthly installments over the planned period. Seller financing is a critical component of a business deal structure.

Earn Out

Earnout component of a buyout is used when the buyer and seller cannot agree on sales projections of the company being acquired. Earnout is a way by which the business buyer pays the business seller based on future company sales. Earn-outs are typically based on pre-determined sales targets.

Mezzanine Financing

Mezzanine financing is a loan to the owner and generally refers to the layer of financing between a company's debt and equity filling the gap between the two. It is subordinate in priority of payment to debt, but senior to equity.

Seller Retained Equity

With seller retained equity the business seller retains some equity in the business when the deal closes. Ownership retention in the business typically ranges from 10% to 49%.With seller retained equity the business seller becomes an outside investor in the business. Compared to seller financing, which pays between 5-10% interest, retained equity can result in significant returns if the business does well.


Other ways to structure a deal as negotiated by the business buyer and business seller. Holdbacks are an example. Holdbacks are the reverse of earn outs. Buyers may use “holdback” funds at close, which will be released to the seller if financial and business performance metrics are achieved. Holdbacks are sometimes used with earn outs to provide downside protection for buyers and upside rewards to the seller.


Buyer Types

Approximately 40% of the buyers tend to be strategic and 60% tend to be financial buyers. Strategic buyers tend to pay premium between 1 percent and 20 percent. Business buyer types include Financial buyers, Strategic buyers, Special-Purpose buyers, Lifestyle Business buyers, Owner / Managers and Passive Investor. For more details please review the blog post “Determine Business Buyer Persona”.

Deal Size

Typical deal investment Sizes fall into the following blocks:
Less than $1 Million 8%
$1 - 5 Million 26%
$5 - 10 Million 36%
$10 - 25 Million 42%
$25 - 50 Million 21%
$50 - 100 Million 13%
$100 - 500 Million 11%

Disclaimer: provides business for sale classifieds. All business for sale and other business opportunities are not an offering or purchase recommendation by We rely on the accuracy of the content submitted to us by business owners and intermediaries representing business owners. A business buyer must seek the advice of a Business Broker or Business Professional such as a lawyer, financial consultant and accountant before closing the deal. Please review our Disclaimer for more details.
Buyer / Seller Beware: Buyers and Sellers must be on guard and must consult a Business Broker before making / accepting an offer or meeting face-to-face (in person).
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