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Buyer Raises Purchase Price Based on New Terms

01.01.16

Situation

Consulting company owners were negotiating the sale of their business assets to a larger competitor. The gap between the seller’s asking price and the buyer’s offered price was significant, and it looked like the deal may fall apart. The sellers were also concerned about taxes and lack of retirement planning. The buyer’s offer included employment contracts for the sellers to become employees of the buyer for three years post-deal. The sellers were getting little advice in these areas from their current CPA, and they asked BPM to look at their situation.

How We Helped

We recommended changes to the deal that included additional contingent sales proceeds based on agreed-upon targets, plus a contract for services to be rendered by the seller for three years. The seller received an income for services for the next three years, which was used in part to fund retirement plan contributions for its owner-sellers for three consecutive years.

Results

The buyer was comfortable raising the price offered, since it was contingent on reaching financial goals. In addition, the seller received a higher price for their business than the buyer was originally willing to pay. Finally, the sellers had sufficient cash to fund the retirement plans for the owners for three years.