Levers & Currency: M&A Deal Structures

<p>Today's deal structures are continuing to evolve in an effort to attract sellers and maximize valuations when justifying accretive business combinations.  The use of equity, employment agreements and bonuses are on the rise as buyers secure deals through sweetening the pot.  That said the “cash is king” still holds water as sellers are not always sold on the combined business outlook or even just stability of the global economy and taking your returns at close appeals to many, especially when the sellers are not looking to stick around post close. In this episode we will talk about the levers we are seeing in deals these days and how buyers and sellers are reaching alignment. </p><p> </p><p><strong>Seller note:</strong></p><p>An owner of the business act like a bank where the owner lends the buyer money that thy are going to pay over time. This would also include interest that is paid over time with a higher interest rate than a typical bank. This is a way for you to receive the money from selling the business over time by providing financing to the buyer. A seller note is typically not contingent on the performance of the business.<br /> </p><p><strong>Equity: </strong></p><p>Using stock as a means of currency in a deal is not new but what is starting to pop up a little more than usual is the use of equity in the form of ESOP (employee stock option plan) and warrants as a means to retain leadership, management and even contributors. In today's job market the value of talent is even more important as employee retention is under pressure across all industries. <br /> </p><p>We are also seeing the traditional use of equity for things like earnouts as buyers look to preserve cash for growth / operations by increasing the value at a later date with some committed or liquidible buyouts in the future.  These scenarios are seen less these days as the consolidation is in full swing and deals are almost always competitive. </p><p> </p><p><strong>Employment agreements: </strong></p><p>When the sellers are tied to a deal