Price and Terms of the Deal

In negotiating the M&A transaction both price and terms will be discussed.

While the top-line buyout number is the main focus, the underlying terms should also be considered carefully.

Here’s a list of terms to review:

Payment amount — how much and when will the payout occur?

Who gets paid — payment goes to those on the cap table but there may be other factors at play.

Payment structure — how you structure the deal with regard to taxes and the legal entity of the company is a key factor to consider.

Employee impact — what is the plan for integrating the companies and how will it impact the employees?

Customer impact — in the event the buyout is to shut down a competitor then consider how it will impact those customers.

Earnouts — In the event of an earnout, the payment could be higher if sales targets are met.

The top-level price is important, but the underlying terms often determine if it is a good deal or not.

 

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