The headline price isn’t the whole story. Learn how to navigate common deal terms that protect both parties and ensure a fair outcome.

Even after agreeing on a purchase price, many deal terms can shift during due diligence. Sellers should understand common mechanisms like working capital adjustments, earnouts, and escrow accounts that impact the final proceeds.

• Working Capital Adjustments: These ensure the business’s day-to-day assets and liabilities are maintained at an agreed level at closing. If actual working capital differs, the purchase price is adjusted accordingly. Accurate forecasts and clean financials reduce disputes.
• Earnouts: Sometimes used when buyers and sellers disagree on valuation or future growth potential. Part of the price is deferred and contingent on the business meeting specific performance targets post-closing. Earnouts can align incentives but also lead to disputes if terms aren’t crystal clear.
• Escrow Accounts: A portion of the sale proceeds is held in escrow for a set period post-closing to cover indemnity claims or unforeseen liabilities. Sellers should negotiate the amount, duration, and release conditions carefully to avoid unnecessarily tying up funds.

Clear, detailed agreements and realistic expectations help both parties navigate these terms successfully. Working with experienced advisors during negotiations is essential to protect your interests.

Deal terms beyond price—like earnouts and escrows—play a big role in your final payout and risk exposure. Understanding and negotiating these terms carefully is critical.