How to compare business sale offers beyond price

Receiving an offer for a business is a major moment. It can also be the point when the owner has to look past a single headline number and assess what the buyer is actually proposing. Two offers at a similar price may differ considerably in payment timing, conditions, funding, transition requirements and likelihood of completion.

An offer is a proposal, not the final outcome. The terms may change as the parties negotiate and the buyer completes due diligence. A careful comparison gives the seller a clearer basis for deciding which offer to progress and what questions to resolve before committing further time and information.

Understand the payment structure

Start by mapping when and how the consideration would be paid. Is the amount payable at completion, or does some part depend on future performance, a later event or a period of continued involvement? Deferred consideration and earn-outs can create different risks and responsibilities for a seller compared with cash paid at completion.

The headline price can therefore be an incomplete guide to the value and certainty of an offer. Sellers should understand the assumptions, timeframes, measurement rules and obligations attached to any conditional or delayed payment. Their legal and tax advisers can help assess how proposed terms apply to their specific circumstances.

Examine conditions and funding

An offer may be conditional on due diligence, financing, approvals, contract consents or other requirements. The seller should understand which conditions remain open, who controls them, how long they may take and what happens if they are not satisfied. A buyer’s funding position and approval process can affect the timetable and probability of completion.

Test certainty against evidence. What funding remains to be secured? Does the buyer need investment committee or board approval? Does completion depend on a third party or another transaction? These answers help establish whether the buyer can meet its proposed timetable.

Consider transition and ongoing obligations

Some buyers expect the owner or key employees to support a handover, remain in the business for a period or provide other transition assistance. The amount and duration of that involvement should be made clear. So should any non-compete, warranty, indemnity or other continuing obligations, with legal advice on the precise terms.

These elements may be important to a buyer and may be negotiable. For the seller, they affect what life after completion looks like and can influence whether an offer aligns with the owner’s plans.

Compare the offers against the same criteria

A simple comparison should include price, payment structure, conditions, funding, timing, transition, key obligations and the buyer’s demonstrated commitment. Consider also the process to date: has the buyer responded constructively, asked proportionate questions and made decisions when expected? Conduct and credibility do not replace contractual protections, but they can inform the seller’s view of execution risk.

G&G’s selling service describes negotiation across price, terms and certainty, with attention to the owner’s priorities and the whole deal. Its existing article on business value explains why value depends on factors buyers assess; the sale process guide discusses how diligence and transaction steps can affect timing.

Decide what is worth negotiating

Not every term deserves equal attention. Identify which parts of the offer are essential, which may be flexible and what evidence would make a proposal more certain. A seller may choose to negotiate price, seek clearer funding evidence, narrow a condition or agree a more workable transition. The right priorities depend on the owner’s objectives and professional advice.

Understand what you would receive at completion

Check whether the headline price refers to enterprise value, which values the business operations, or equity value, which values the shares. The amount payable to shareholders may be adjusted for cash, debt, working capital and other agreed items. Also identify any retention or escrow amount held back after completion. These details can materially change the cash received on the day.

Ask your advisers to reconcile each headline offer to the expected proceeds at completion and any amounts payable later. Compare the assumptions on the same basis, and have your legal and tax advisers review the implications for your circumstances.

This article is general commentary for Australian business owners and does not take account of any particular business, its circumstances or its objectives. Any figures, ranges and examples are illustrative only and are not a valuation, an appraisal or advice on your business. Advice on a specific business is given only through a confidential engagement with G&G Advisory Partners.