How to Negotiate a Business Sale After the First Offer

A response is stronger when it rests on evidence: maintainable earnings, the reasons this buyer values the business, and any comparable transactions that are genuinely relevant. Comparable deals are useful context but have limits, because terms are often private and businesses differ.

A headline figure tells only part of the story. Two offers with the same price can be worth very different amounts depending on how and when the money is paid and what conditions apply.

The amount paid on the day the deal completes is the most certain part of the price. Many sellers place a high value on it, and it is a sensible starting point when comparing offers.

An earn-out links part of the price to the business's performance after completion. It can bridge a gap between what the seller expects and what the buyer will pay upfront, but the seller is exposed to performance under someone else's control. The measures, period, accounting rules and protections need careful drafting by a solicitor.

Deferred consideration is a fixed amount paid later, rather than linked to performance. The key questions are when it is paid, whether it is secured, and what happens if the buyer cannot pay.

Some buyers, particularly investors, ask the seller to keep a minority stake. That keeps some upside but also risk, and its value depends on the shareholder agreement and a future exit you may not control.

Offers are often expressed as an enterprise value and then adjusted for debt, cash and the level of working capital delivered at completion. The mechanism, such as completion accounts or a locked box, can change the amount received significantly. Your accountant should explain how it applies.

Buyers often want the owner to stay for a period. Agree what that role is, how long it lasts, what you are paid, and how it interacts with any earn-out. A role you do not want can be a reason to prefer a different offer.

Heads of Terms set out the main agreed points: price, structure, key conditions, exclusivity and timetable. They are largely non-binding, though confidentiality and exclusivity clauses usually are binding. Granting exclusivity before price, structure and timetable are clear reduces your leverage if terms later move.

Agree a realistic timetable for due diligence and documents, and keep to it. Deals tend to weaken when weeks pass without progress, and long delays give buyers room to revisit terms.

An adviser can handle difficult points of negotiation so that the relationship between the owner and buyer, who may work together after completion, is protected. A solicitor and accountant should review structure and documents before anything is signed.

It helps to decide in advance which points would end the conversation, for example:

• A cash-at-completion amount below a level you would accept.
• Conditions or earn-out terms you could not realistically meet.
• Funding that remains unproven.
• Repeated attempts to reduce the price without new evidence.
• Plans for staff or the business you cannot support.