At this point in time, your business has attracted real interest. Now comes one of the most exciting (and nerve-wracking) parts of the process...

It’s time to peruse through your many suitors and evaluate offers. These are actual offers with actual dollar amounts firmly written on paper (or on a screen).

The thing is, some offers look great on paper but fall apart when you start to look at them more closely. Others may appear slightly lower at first, but offer you more of what you actually want out of a sale—like better long-term outcomes, or a smoother transition.

You only get one chance to exit, and you don’t want to regret this decision—or waste time second-guessing yourself. Here are the most important factors to consider when you’re evaluating an offer:

Understand the Total Enterprise Value (EV)

This is the big headline number, what the buyer says your business is “worth.” It’s what goes in your press release and becomes the story that people tell.

But that number alone doesn’t tell you how much cash you’ll actually receive. For example, a $10 million offer can result in a $4 million check at closing… or a $9 million check.

It all depends on how you structure the deal. You might get your payments right away (up front), or over time (earn-out), or stay invested in the business (roll-over equity), or any combination of these.

Upfront Payment at Closing

This is the cleanest outcome. You end up with cash in hand to spend (or invest) as you so choose. But some buyers may only offer a portion upfront.

Earn-Out

You agree to receive part of the purchase price later, often contingent on the business hitting specific targets. Buyers like this because it incentivizes the owner to set up the business for long-term growth after the transition. However, it does introduce some risk for the seller—for example, if the buyer mismanages the business, the portion of the sale price you were expecting could decrease or, in the worst-case scenario, disappear entirely.

Roll-Over Equity

You keep a minority stake in the business and participate in the next exit. This is common with private equity deals, and they can be lucrative, but only if you believe in the buyer and want to stay involved. 

It’s important to be crystal clear on how much of the offer is guaranteed (cash in your pocket) rather than contingent (potential cash over time). 

For the buyer, they want the safety of not paying everything up front to protect their interests and ensure they end up with the business they were hoping for. The more money they can defer, the more they see that you, the seller, have skin in the game.

On the other hand, you want to get as much money as possible for the business you built. Cash in hand ensures you get that, but there may be a higher offer if you’re willing to collect it over the long run. If you’re burnt out and want a clean exit, it may feel better to simply take what you can get and walk away neatly. 

While it’s important to consider, there are more protections for both buyers and sellers than simply when you receive cash.

Reps & Warranties Insurance vs. Hold-Backs

Hold-backs and reps, and warranties insurance offer buyers more protection in case something goes wrong post-sale.

• Reps & Warranties Insurance: the buyer gets insurance protection, so if a problem arises, the insurer pays. This is often cleaner for the seller so that you’re not liable if something goes wrong.

• Hold-Backs: portions of the purchase price withheld in escrow (usually 10–15%) for 12–24 months, just in case. You will get this money over time, so long as major problems aren’t discovered post-sale.
  

If you’ve been 100% transparent during the sale process, then you probably have nothing to worry about. But it’s still a good idea to check in with your lawyer to see what protections are fair and what’s overreaching. 

Deal Structure: Asset Purchase vs. Stock Purchase

This one’s for the tax and legal pros, but it’s critical. Think about this: if you put yourself in the highest tax bracket, you could stand to lose a major chunk of your cash at close.

• Asset Purchase: Buyer purchases specific assets (and sometimes liabilities). This is often preferred by buyers for tax and liability reasons.

• Stock Purchase: Buyer purchases the company itself. This is usually simpler for the seller.

Each has tax implications and may affect things like contracts, licenses, and team transitions. This is where you (and the buyer) want a team of experts to ensure you both come out ahead. 

Once these are complete, you have a deal in place. But there are still ramifications to consider, such as whether or not you will walk away from the business or stay involved. If you stay on: 

• What’s your compensation?

• Are there performance-based incentives?

• How long are you expected to stay?

You may be selling yourself along with the business, so you need to make sure you’re getting what you’re worth (in both instances). 

Another factor to consider is that deals can take a long time (6-12 months in most cases). Some deals fall apart simply because they drag on too long. Make sure your LOI outlines a reasonable, actionable timeline with clear milestones and accountability on both sides.

It’s important to remember that most Letters of Intent (LOIs) are non-binding, but they still matter. They set the tone and framework for the entire deal. If something doesn’t feel right at this stage, trust your gut (and your advisor).

Non-binding also means that you have flexibility regarding LOIs. Multiple offers are a good position for you to be in. It means buyers may fight over who gets to buy your company.

Handling a Bidding War

• Don’t be afraid to tell buyers that others are at the table.

• Stay professional and keep the process controlled. Too much chaos kills deals.

• Decide what matters most to you: Highest value? Smoothest transition? Best post-sale role? Fastest close?

You don’t want the best offer on paper. You want the right offer for you. 

If you’re getting serious about how all of this works, it’s a good idea to book a complimentary meeting with an expert:

👉Book a call with an M&A advisor

In the next post, we’ll investigate the roller coaster of due diligence: what it is, what it uncovers, and how to survive it without losing your mind.