Maximising Business Sale Value Through Deal Structure
When preparing to sell your business, the structure of the deal can be just as important as the price itself. Whether you run a retail outlet, hospitality venue, or specialist service provider, your exit will be shaped by more than just what the business is worth. Payment terms, funding strategies, and risk allocation all play a vital part in determining whether a transaction works for both sides.
At Kings, we support business owners through every stage of the sale process. A key focus of this is helping our clients understand how deal and payment structure impacts value, timing, and long-term outcomes.
Asset or Entity? Understanding the Sale Structure
Before payment can be structured, you must first define what is being sold. Most business sales fall into one of two categories: a share sale or an asset sale.
In a share sale, the buyer purchases the legal entity that owns and operates the business. That includes contracts, staff, liabilities, goodwill, intellectual property, and trading history. This approach is often used where continuity is important, or where the business has a strong brand or trading reputation.
By contrast, an asset sale involves the transfer of specific elements of the business. These might include physical assets, the trading name, customer databases, stock, or fixtures and fittings. Asset sales are more common in retail and hospitality, where buyers may want to avoid taking on liabilities and instead focus on key components they can grow from.
Note: For sole traders and partnerships, only asset sales are possible, as there are no shares to transfer.
Each route has implications for tax, risk, and legal complexity. Sellers should take advice early to ensure they pursue the right path for their goals.
Understanding How Buyers Fund Acquisitions
Few buyers acquire a business using only their own capital. In most cases, deals are made possible through a combination of funding sources and payment mechanisms.
Vendor Finance is a common approach where the seller agrees to receive a portion of the consideration in instalments. This can help buyers who are confident operators but lack immediate access to the full purchase amount. These agreements often include interest and are secured through legal documentation.
Bridge Finance is a short-term funding method used to allow completion while the buyer waits for longer-term finance to be arranged. It is often used when another investment is being sold, or while commercial borrowing is still being finalised.
Bank Loans and Asset-Backed Lending provide another route. Many buyers seek support from lenders who understand the business model or can lend against tangible assets or predictable cash flows. Invoice financing and leaseback arrangements can also release working capital to support the transaction.
Equity Investment or Private Funding is sometimes used where buyers bring in a partner or investor to help fund the acquisition. This is especially common when targeting larger or multi-site operations that require greater capital.
Stapled Finance is an increasingly popular strategy. In this case, sellers provide pre-arranged finance packages through independent brokers or lending partners. These offers help attract serious buyers by reducing barriers and speeding up decision-making.
Designing a Payment Structure That Works
Once the buyer has secured finance, attention turns to how and when payments will be made. This is where deal structure becomes a crucial factor.
Full Payment on Completion is straightforward and gives the seller immediate value. However, it is less common for SME transactions as it limits the buyer pool to those with full capital available.
Deferred Consideration offers a more flexible route. The buyer pays part of the value at completion, with the remainder scheduled over an agreed timeframe. These payments typically include interest and can be aligned to the business’s natural cash flow cycle.
Earn-Outs are performance-based structures where the seller receives additional payments if the business achieves set financial targets post-sale. These are commonly used in service-led or growing businesses where the buyer wants to align value to future success.
Contingent Payments are linked to specific milestones. For example, the release of a payment might depend on transferring a lease, completing a licensing agreement, or renewing a supplier contract. These clauses provide assurance that critical steps will be completed before value is released.
Milestone-Based Payouts work similarly but are based on operational goals. These might include completing a refurbishment, launching a new product line, or hitting a sales threshold. This gives buyers the confidence that the business will remain viable and focused post-completion.
Holdbacks and Retentions are sometimes agreed to protect the buyer against unforeseen claims. A small portion of the consideration is held in reserve for a defined period and may be released once any warranties or indemnities have expired.
Escrow Arrangements are used in more complex or conditional deals. In this case, a third party such as a solicitor holds the funds until all conditions are satisfied. This adds a layer of security and transparency.
Turnover-Linked Payments are common in franchise-style businesses or those with untapped growth potential. The seller receives a percentage of future sales for a defined period, allowing them to benefit from growth while sharing risk with the buyer.
Royalty or Licensing Agreements are often used in businesses built around intellectual property. The seller receives ongoing income from future use of branding, software, recipes, or other proprietary material.
Reverse Earn-Outs are the opposite of the standard model. Here, the headline price is reduced if performance drops below a certain level. These are used where the buyer is particularly risk-averse or the market is volatile.
Balancing Risk, Return and Realism
The right payment strategy depends on your objectives as a seller. If your priority is a clean break, then a lower total price in return for full and immediate payment may be worth accepting. If you are willing to stay involved, you may benefit from a structure that rewards you over time, especially if the business has growth potential.
From the buyer’s perspective, structured payments help manage cash flow, reduce upfront pressure, and build confidence that the seller is invested in their success. The key is to align interests so that both parties are motivated to see the business thrive after the deal completes.
Why Work with Kings Corporate
At Kings Corporate, we believe that selling your business is not just about finding a buyer. It is about understanding the market, structuring the deal in the right way, and protecting your future as you prepare to step away.
We specialise in business sales across the UK’s retail, hospitality, service, and trading sectors. Our team brings together valuation expertise, buyer insight, and strong negotiation skills to deliver the best possible outcome for every client. From initial appraisal to heads of terms and completion, we manage the process with clarity and precision.
We also support buyers by working with independent funding providers, helping to arrange finance that keeps deals moving. Whether it is a straightforward acquisition or a complex structure involving deferred payments or milestones, we guide all parties through each step with confidence and professionalism. Contact Kings today if you are looking to buy or sell a business.
