Offers & due diligence
What deal terms matter besides the headline purchase price?
The deal terms that decide what you keep and what risk you carry after closing, and what sellers usually push for on each one.
By Michael D. Rubin, CEO & Founder · September 2026 · 954 words
Besides the headline price, the terms that matter most are how much you receive in cash at closing, how much is deferred or at risk, the working capital target, your liability after closing, your non-compete and post-sale role, and the conditions the buyer can use to walk away. Together they decide what you actually keep and how much risk you still carry after you sign.
Two offers with the same price can be very different deals. Below are the terms to read, what each one means, and what sellers usually push for.
Terms that change what you receive
A useful habit is to rewrite every offer in three lines: cash at closing, money paid later that is fairly certain, and money paid later that depends on results or claims. An offer of $12 million with $7 million in cash and $3 million in earnout can be worth less to you than an offer of $11 million with $10 million in cash.
| Term | What it means | What sellers usually push for |
|---|---|---|
| Cash at closing | The portion of the price wired on closing day | As large a share of the price as possible |
| Seller note | A loan from you to the buyer for part of the price, repaid with interest | A shorter term, fair interest, and security or a guarantee |
| Earnout | Part of the price paid later, only if the business hits agreed targets | Simple targets you can influence, a short period, clear accounting rules |
| Escrow or holdback | Part of the price held back for a period to cover claims | A smaller amount and a shorter period |
| Rollover equity | Part of the price taken as ownership in the buyer's company | Clear rights, a fair valuation and a realistic view of when it pays out |
| Working capital peg | The level of working capital the company must deliver at closing | A fair, average-based target agreed early |
Terms that decide your risk after closing
The purchase agreement contains representations and warranties: statements you make about the company, such as that the financial statements are accurate and there are no undisclosed lawsuits. If one turns out to be wrong, the indemnification section decides what you owe the buyer.
The points to negotiate are the cap, the most you could ever owe; the basket, a threshold of small claims below which you owe nothing; and the survival period, how long after closing claims can be made. Some buyers use representations and warranties insurance, which can reduce what the seller has at stake. Your transaction attorney leads this negotiation, and it deserves as much attention as the price.
Terms about you
These terms shape the years after the sale. A transition role with no defined end can keep you tied to a company you no longer control. A non-compete that is too broad can stop you from working in your field or investing in a related business. And if you keep the real estate, the lease becomes a long-term relationship with the buyer, so the rent, the term and who pays for repairs deserve the same care as the purchase price.
- Transition role: how long you stay, in what position, full-time or part-time, and how you are paid
- Non-compete and non-solicitation: how long, in what area and covering which activities; they should be reasonable and tied to what the buyer is actually buying
- Key employee agreements: whether the buyer requires them before closing, and what happens if someone will not sign
- Real estate: if you own the building, whether it is sold or leased to the buyer, and on what rent and term
Terms that decide whether the deal closes
Read the conditions to closing carefully: financing, satisfactory due diligence, landlord and customer consents, and key employee agreements. Broad language such as diligence satisfactory to the buyer in its sole discretion gives the buyer an easy way out, or a lever to reopen the price. The narrower and more objective each condition is, the more certain your closing becomes.
Financing certainty matters too. An all-cash buyer, or one with committed financing, can be worth more than a slightly higher offer that depends on a loan not yet approved. Our business financing page explains how SBA, conventional and seller-financed structures differ. Finally, the exclusivity period decides how long you are off the market while the buyer completes its work.
Asset sale or stock sale
Whether the buyer purchases the company's assets or your ownership interest changes both your taxes and the liabilities you leave behind. Buyers generally prefer to buy assets; sellers often prefer to sell stock. In an asset sale, the way the price is allocated among equipment, inventory, goodwill and a non-compete also affects the taxes on both sides. Your CPA and transaction attorney decide what works for you, and this is a term to settle in the letter of intent rather than discover in the purchase agreement. Ask your CPA to show you the after-tax result of each structure on the actual offers in front of you. A higher price in an asset sale can leave you with less than a lower price in a stock sale, and the reverse can also be true.
Where MDR & Associates fits
When letters of intent arrive, we present each one to you in person and break it into cash at closing, money paid later, money at risk and obligations after closing, so you compare deals rather than prices. Because we negotiate several offers at once through our sell-side service, competition improves terms as well as price. We work alongside your transaction attorney and CPA on the legal and tax sides. The guide on how to compare offers goes deeper. To see how a sale of your company might be structured, contact us.
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