Negotiations to make the deal are down to the wire, the price difference has narrowed, but buyer and seller are not yet in agreement. Here are some ideas that might bridge the price gap and keep the deal on track to closing:
- If there is real estate involved, let the seller retain it and lease it back to the buyer, reducing the sale price. Could provide call and put options on the real property. A similar arrangement could be done for major pieces of equipment.
- Have seller retain some of the higher-priced inventory and consign it to the buyer – when it sells, the seller gets paid.
- Structure additional payments to the seller in the form of a royalty on sales rather than an earn-out on profits.
- If feasible, split off the most profitable or fastest growing segment of the business in which the seller retains an interest. May provide option to buyer to acquire the balance later.
- Buyers acquire a percentage interest (more than half) of the business with the requirement that they purchase the balance in equal installments over a few years.
- Buyer engages the seller with a consulting agreement with additional compensation to be paid annually to the seller.
All such provisions should be reviewed and approved by each party’s professional advisors; there may be unforeseen legal or tax implications.