The 10 terms, in three groups.
Connectivity map for the 10 terms, in three groups
- 5.1 Concept: The 10 terms, in three groups The core concept in the 10 pa terms
- Group 1: Economics And Risk: Group 1: Economics and risk Price and payment mechanics including the working capital adjustment formula, earnout measurement and reporting, escrow amount and release schedule, reps and warranties, and indemnification (cap 10 to 25% of purchase price, basket $10K to $
- Group 2: Operational Transfer: Group 2: Operational transfer Non-compete (2 to 5 years), transition services with specific deliverables and milestones for each month of the seller's involvement, and consents and conditions precedent including change-of-control provisions on concentrated customer cont
- Group 3: Tax And Process: Group 3: Tax and process Asset versus stock sale (asset sales are more common in the LMM; sellers prefer stock sales because they pay capital gains rates on the full purchase price; buyers prefer asset sales because they get a step-up in basis - meaning the assets
- The 10 terms, in three groups feeds Group 1: Economics and risk: Group 1: Economics and risk supports the 10 terms, in three groups.
- The 10 terms, in three groups feeds Group 2: Operational transfer: Group 2: Operational transfer supports the 10 terms, in three groups.
- The 10 terms, in three groups feeds Group 3: Tax and process: Group 3: Tax and process supports the 10 terms, in three groups.
Which reps are worth fighting for.
Decision gate for which reps are worth fighting for. Proceed when: The 10 terms are agreed and documented. Move to the 30-day close sprint.
- Reconsider: One or two terms remain open. Decide whether they are deal-breakers or bridgeable with alternative structure.
- Proceed: The 10 terms are agreed and documented. Move to the 30-day close sprint.
- Walk: Seller demands terms that eliminate your core protections - uncapped indemnification, zero escrow, survival under 12 mon
- Reconsider: One or two terms remain open. Decide whether they are deal-breakers or bridgeable with alternative structure.
Fight the battles that matter, release the ones that do not
An experienced buyer who knows market terms moves through a purchase agreement efficiently, fights hard on the 10 items that protect them, and lets go of everything else. An inexperienced buyer argues about everything, exhausts the seller and their advisors, and creates friction that threatens the deal over issues that would never have mattered.
This course is operational guidance, not investment, legal, tax, or financial advice. SilverShore Partners is not a registered broker-dealer or investment adviser; in qualifying private-company transactions we may operate within the federal M&A broker exemption under Section 15(b)(13) of the Securities Exchange Act. Confirm specifics with your own advisors.