Deal Structure: Thinking Outside the Box
The price gap between buyer and seller can often prevent a deal from closing. However, if the principals really want the deal to work, and their advisors really want to help, the following ideas might get the juices flowing so that all of the parties involved can think outside the box in order to make the deal work for everyone.
If the seller owns the real estate, let him or her lease it to the buyer, thus reducing the price. Another idea is to have the seller lease the premises to the buyer at a higher rent, thereby reducing the goodwill factor. The seller could also lease the machinery and equipment, again reducing the overall price.
If it is a fast-growing business with a possible big upside, let the seller share in the growth through an override or royalty over a set sales dollar amount. Or, place a fast-growing portion of the business in a separate subsidiary with the seller owning a part of it – and giving the buyer an option to buy that portion.
Let the buyer buy 70 percent, for example, of the business and the right to purchase 10 percent more each year on a set formula, thus reducing the price.
When all else fails, one good way to solve major issues between a buyers and a seller is for them to meet for dinner, just the two of them, so they can talk about how to make the deal work. We also suggest that you always consult with a professional intermediary as experienced intermediaries can offer helpful ideas and suggestions as to what could work for both the buyer and the seller.
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