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My business is being sold in combination with two other businesses. Partners own 100% of the other companies and 67% of mine. The likelihood that my valuation is not reflected appropriately in this consolidated arrangement is very high. Depending upon which metrics are used to value the respective companies, I could see a pro rata payout ranging from 3% to 13% of the whole. Discrepancy is due primarily to my company carrying 81% EBITDA margin while the other two businesses hover around 15-20% -- however, those companies generate much more revenue in comparison (for now). So the stakes are high and there are millions on the line here. I have no experience in this world and financial matters are not my forte. I'd be looking at paying 3%-8% of my collected earn out to the experienced representative. Is this type of arrangement normal? Assuming much complexity, my IP and future maneuverability are at stake, AND I'd be negotiating against family members (both partners), would this make sense? My gut says yes but I'd really appreciate honest feedback.

Mergers & Acquisitions

Deal Structuring

Answer

MIGUEL REYNOLDS answered

In my experience working in similar cases in several countries, I can say that any complex solution starts by simplifying it and concentrate on the essential. So focus on your objectives and you will do fine.

The model of collaboration you propose seem reasonable to me. I will be happy to explore it with you.