Did you know that most SME owners don’t receive the full asking price when they sell their business? The difference often comes down to how the deal is structured, not just the price tag.
If you’re considering selling your small or medium sized enterprise (SME), understanding your exit financing options is critical. The right structure can improve your total payout, reduce tax exposure, and align posts sale commitments with your goals.
Here’s a guide to the 5 deal structures SME owners use and how each can support a smooth, profitable transition.
1. Earn outs
An earn out defers part of the purchase price, paid only if the business hits agreed performance targets after the sale. This structure is useful when there’s uncertainty around future growth.
Pros
- Enhances total potential payout
- Aligns incentives if you stay involved temporarily
- Reduces buyer’s risk and helps close the deal
Cons
- Payments depend on post sale performance
- Risk of disputes over financial metrics
- Delays your full financial exit
Best for: Sellers confident in growth and willing to stay engaged post sale.
2. Seller Financing
In this approach, you act as the lender, financing part of the sale. The buyer repays you over time, often with interest. It’s common when traditional financing is limited, especially in family or trust based deals.
Pros
- Can speed up the transaction
- Demonstrates seller confidence
- Offers potential interest income
Cons
- Buyer may default (credit risk)
- You’re not fully cashed out at closing
- May involve continued involvement or oversight
Best for: Sellers with a strong relationship with the buyer and willingness to share risk.
3. Private Equity Buyouts
A private equity (PE) firm acquires part or all of your business with plans to scale and eventually exit. Spain has a robust PE sector, making this a viable option for growth stage SMEs.
Pros
- High deal certainty and speed
- Opportunity to retain equity for future upside
- Access to capital and experienced management
Cons
- PE firms often demand significant control
- May pressure short to midterm performance
- Negotiations can be complex
Best for: Owners seeking a growth partner, phased exit, or professional support.
4. Strategic Acquisition with Deferred Consideration
In a strategic sale, a larger company acquires your SME and defers part of the payment, either fixed or tied to performance milestones. These deals often aim for synergy and integration.
Pros
- Buyers typically have the resources to close the deal
- Deferred terms can be customized
- Possible alignment in mission, team, or operations
Cons
- Cultural or operational integration risks
- Shifts in company direction post sale
- May involve ongoing obligations
Best for: Sellers prioritizing continuity for staff, customers, and long-term legacy.
5. Management Buyout (MBO)
An MBO involves your management team buying the company, often supported by outside funding. This method is popular in succession planning and family-owned firms.
Pros
- Preserves internal culture and leadership
- Reduces disruption to operations
- Keeps the business in trusted hands
Cons
- May require external financing
- Seller might need to support the deal (e.g., with deferred terms)
- Personal relationships can complicate negotiations
Best for: Owners looking for a trusted, internal successor and minimal operational change.
Choosing the Right Exit Structure
Every deal structure has trade-offs—in payout timing, involvement level, and risk exposure. The best option depends on:
- Your financial objectives
- Your appetite for post-sale involvement
- Your trust in the buyer
- Tax and legal considerations
Working with a qualified M&A advisor helps you navigate these complexities and maximize your return while protecting your legacy.
How Advisory34 Can Help
At Advisory34, we help SME owners sell their businesses with confidence. From valuation and buyer matching to negotiation and deal structuring, our team provides personalized, expert guidance every step of the way.
Whether you’re considering an earnout, seller financing, or a PE exit—we’ll ensure your priorities are front and centre.
Ready to explore your exit options? Contact us today to start planning a successful and rewarding exit.
