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Guide6 min readUpdated last week

Making and countering an offer

Price is one term out of five, and rarely the one that kills a deal. Structure, timing, what stays in the business, and who carries the risk after close matter as much — and they are where a well-built offer wins against a higher number.

The five terms of any offer

PriceThe headline. Least negotiable in perception, most negotiable in practice once structure moves.
Cash at closeWhat the seller actually banks on day one. Often matters more to them than the total.
Deferred or earnoutThe part contingent on future performance. Shifts risk to the seller, so it costs goodwill.
Working capitalWhat is left in the business at close. Vague treatment here causes more post-close disputes than price ever does.
TransitionHow long the owner stays and in what capacity. Cheap for you to ask for, valuable to have.

Anchoring without insulting

An offer materially below the valuation range needs a reason attached, in the same message. "Your customer concentration at 31% is above the sector median, which is why I am at 4.1× rather than 5" is a negotiation. The seller reads that reasoning with the offer; the same number without it reads as an insult.

Lead with the reasoning, not the number

Sellers forgive a low offer they understand. They rarely re-engage after one they do not.

When an earnout helps

  • The seller is confident about growth you cannot yet verify. An earnout lets them prove it and get paid for it.
  • A key customer contract renews shortly after close, and neither side can predict the outcome.
  • The owner is staying on and their involvement genuinely drives the result.

It does not help when you are simply short of the price, or when the metric is one you control after close. Earnouts tied to profit rather than revenue are the ones sellers refuse, because you can move profit.

Reading a counter

Look at which terms moved. A seller who holds price but stretches transition support is telling you the number is emotional and the structure is flexible. One who cuts the earnout and takes less cash is telling you they want certainty and speed. Answer the signal, not the number.

What sellers push back on

  • Earnouts longer than 12 months, or measured on anything the buyer controls.
  • Working capital pegs set without a stated calculation.
  • Long exclusivity periods with no diligence deadline attached.
  • Financing contingencies with no proof of funds behind them — which is where verification does real work.

Moving from offer to LOI

Once the five terms are accepted on the offer, they go into a letter of intent. It is non-binding, but it fixes the shape of the deal, starts formal diligence, and sets the exclusivity clock. Agree the diligence list and the closing date early, so both sides know what happens next.

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