Business Valuations

Closing the Price Gap

The deal is getting down to the wire, the price differential is close, but the parties are not yet in agreement. Following are some ideas that might get the ball rolling and help bring the parties together.

  • Let the seller retain the real estate and rent it to the buyer, thus reducing the price. The same could be done for major pieces of equipment. Let the seller lease them to the buyer reducing the price. The lease should, however, like most leases, provide for a buyout at the end.
  • Structure a royalty on sales rather than an earnout on gross margins or EBIT.
  • Have the parties create a subsidiary for the fastest growing part of the business in which the buyer and seller share 50/50.
  • Let the buyers acquire 70 percent of the business with the requirement that they purchase 10 percent more each year on the same multiple of EBIT as in the 70 percent sale.
  • Arrange a consulting agreement with the seller to provide additional compensation to be paid annually.

Certainly, any agreement or deal structure should be approved by the party’s professional advisors.

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