Beyond the Headline Price
Why “£X million” is only the starting point. Agreeing a headline price is just the beginning.
How that price is structured, paid and adjusted can have a major impact on risk, tax and deal value.
This is one of the most negotiated areas in any deal
The key question
It’s not just “how much?” - it’s “how and when?”
1. Types of consideration
Cash (most common)
Paid at completion
Clean and simple
Preferred by sellers
Certainty = lower risk
Non-cash options
Shares in the buyer
Seller retains upside
But takes market risk
Loan notes
Deferred payment
Seller becomes a creditor
Often used where buyer lacks cash or wants flexibility
2. Timing of payment
Upfront payment
Full amount at completion
Seller gets certainty
Deferred consideration
Paid in instalments
Buyer spreads cost
Risk:
Seller relies on buyer paying later
Often requires protections (interest, security, acceleration rights)
3. Price adjustment mechanisms
This is where deals get technical.
Completion accounts (buyer-friendly)
Price adjusted after completion
Based on actual financial position
If business underperforms - seller repays value.
Locked box (seller-friendly)
Fixed price agreed upfront
No post-completion adjustment
Buyer takes economic risk from locked box date
Earn-outs (performance-based)
· Future payments linked to performance
· Used where parties disagree on value
Bridges valuation gaps but creates complexity
4. Protecting the price
When payment isn’t all upfront, parties need protection:
For sellers:
Security (guarantees, charges)
Interest on deferred sums
Acceleration if buyer defaults
For buyers:
Retention / escrow
Set-off rights
Warranty protection
This is where risk allocation really happens
5. Retentions & escrow
Part of price held back
Used to cover warranty claims
Typical range:
5%–15% of price
Key tension:
Buyer wants protection
Seller wants cash now
6. Real-world deal tension
Every deal balances:
Buyer wants Seller wants
Flexibility
Certainty
Protection
Cash upfront
Adjustments
Fixed price
The final structure is always a negotiation.
Common pitfalls
“Headline price” misunderstood
Earn-outs poorly drafted → disputes
Completion accounts surprises
Deferred payments not secured
Tax impact overlooked
Structure can matter more than price
Where we add value
At Daly McCormick LLP, we:
Help design the right price structure from the outset
Work alongside tax advisers and accountants
Focus on commercial outcomes, not just drafting
Avoid structures that create disputes later
Speak to us
If you or your clients are:
Negotiating a deal
Unsure between earn-out vs fixed price
Concerned about deferred payments
We can help structure the deal properly from day one.
Disclaimer: The information provided here does not, and is not intended to, constitute legal advice. Instead, the information and content available are for general informational purposes only.
