Deal Structures: Trends in Private Company Sales

Selling a business is rarely as simple as agreeing on a price. How that price is paid, the deal structure, can dramatically affect how much money a seller actually receives, when they receive it, and how much risk they continue to carry after closing the deal.

There are many factors that determine what terms a seller receives. By far the most important factors are 1) the unique characteristics or value of the company itself, and 2) how effectively the sale process encourages buyers to compete for the company. Beyond those factors, however, there are other general deal structuring tendencies based on the size of the company and the industry it's in.

This guide is designed to help business owners understand what a “typical” sale looks like in today’s market, so they can have realistic expectations before selling. The data and examples that follow show the most common deal structures by company size and industry, highlighting how much of the purchase price is typically paid in cash at closing, how earn-outs, rollover equity, and seller notes are used, and what terms are standard in the current market.

Use this guide to first understand the general deal structures within your industry and then within the Total Enterprise Value (TEV) group that reflects the value of your company.

Deal Structure by Industry

Deal structure norms vary significantly across industries. Differences in revenue stability, asset intensity, customer relationships, and regulatory complexity all influence how much risk buyers are willing to assume up front versus defer through earnouts, rollover equity, or seller financing.

Manufacturing and Distribution

Manufacturing and distribution companies often have substantial fixed assets, large working-capital needs and customer concentration, all of which drive structure decisions.

• Cash at closing tends to be high, often 80 to 90% of the purchase price, because buyers can secure senior debt against tangible assets like equipment and receivables.

• Seller notes appear somewhat more frequently here than in technology or services because lenders often limit acquisition leverage. Seller notes are more common and they make up a larger portion of purchase price in smaller transactions.

• Earnouts are used selectively to bridge valuation gaps or to hedge against unpredictable future performance.

• Rollover equity is common when the buyer is a private equity firm. Strategic buyers rarely offer rollover equity because they usually intend to integrate business operations rather than leave the acquired company as a stand-alone entity.

Business Services

Professional and business-services firms (accounting, consulting, marketing, staffing, etc.) trade primarily on human capital and recurring client relationships and those risks drive deal structure.

• Cash at closing typically represents 70 - 85% of the total consideration, with the remainder deferred.

• Earnouts are common because much of the company’s value walks out the door each night. Buyers want proof that key employees will remain, clients will stay, and revenue will persist post-closing. Earnout metrics usually emphasize revenue retention or client-renewal rates over EBITDA, since expenses can shift quickly after an acquisition.

• Seller employment agreements are common and may be paired with earnout agreements. For example, an earnout may be contingent on a revenue target AND the seller(s) remaining for the earnout period.

• Rollover equity is less common in this segment. Rollover equity is primarily a private equity tool and private equity firms are not as active in these industries.

• Seller notes are far less common in this industry. They may factor into smaller (< $10 million TEV) transactions, but they are relatively rare in larger transactions.

Buyers use these structures to ensure continuity and avoid paying full value for revenue that might disappear with the departing owner.

Technology and Software-as-a-Service (SaaS)

Technology and SaaS transactions feature high growth potential but high uncertainty.

• Earnouts are much more prevalent than in most other industries. Roughly two-thirds of tech earnouts are based on revenue or annual recurring revenue (ARR) rather than EBITDA, because revenue is easier to measure and less affected by post-deal accounting decisions. The typical duration is 24 months, though some run up to three years.

• Rollover equity is widely used, especially when founders are expected to help scale the company under new ownership. PE firms and even some strategic acquirers often prefer sellers to retain 10–30% of equity to align incentives.

• Seller notes are rare; buyers rely instead on equity incentives and earnouts.

In essence, earnouts in technology deals serve as a valuation bridge for growth projections, rewarding sellers if the promised momentum continues after closing.

Healthcare and Life Sciences

Healthcare and life-sciences transactions operate under unique regulatory oversight and milestone-driven economics.

• Earnouts are the norm, not the exception. They may span three to five years or longer and hinge on clinical milestones, product approvals, or revenue thresholds. In many life-sciences acquisitions, the majority of potential deal value resides in contingent payments tied to FDA or reimbursement milestones with actual payouts often well below the maximum.

• Cash at closing may represent as little as 50–70% of the purchase price, especially for early-stage or development-phase companies.

• Rollover equity is common when the acquirer wants to retain scientific or management talent post-closing.

These earnouts reflect buyers’ need to align payments with the long, uncertain timelines of regulatory clearance and product commercialization.

Consumer Products and Retail

Consumer-facing businesses including branded goods, e-commerce, and retail come with a mix of tangible and intangible risks.

• Cash at closing tends to be moderate (70 - 85%) because brand momentum and shifting consumer demand pose challenges.

• Earnouts typically use revenue or gross-margin metrics over 12 - 24 months to confirm that brand loyalty and distribution relationships remain strong.

• Seller notes are common in smaller (< $10 million TEV) and quite rare in larger (> $25 million ) deals.

• Rollover equity is sometimes included in small to mid-size PE deals where the seller retains operational involvement.

These mechanisms help ensure the business performs through at least one full sales cycle under the buyer’s ownership.

Industrial and Engineering Services

Companies providing fabrication, construction, or field services face project-based revenue cycles and contract timing risks.

• Earnouts often link to backlog conversion (turning contracted work into revenue) or EBITDA margins, rewarding sellers if project performance holds up after the closing.

• Seller notes and retainage-style holdbacks are used to address warranty, rework, or cost-overrun exposure.

• Cash at closing typically represents 70 - 85% of the purchase price, reflecting the project-completion risk inherent in these models.

• Rollover equity is less common in this segment. Rollover equity is primarily a private equity tool and private equity firms are not as active in this industry.

Earnouts here effectively extend the “job-cost warranty” period, tying payments to actual project execution.

Deal Structures by Total Enterprise Value (TEV)

As alluded to above, deal structures within a particular industry vary with the size of the transaction. Small companies are more likely to be acquired by individual buyers where as larger companies are almost always acquired by institutional buyers. Transactions below $10 million TEV are often financed through the Small Business Administration whose rules  (e.g. earnouts are not allowed and seller notes may be used as equity) shape financing behaviors.

The TEV-based deal structure data used in this report are derived from multiple authoritative middle-market datasets, each with its own sector mix. For example, the $1 - $10 million TEV group relies heavily on International Business Broker Association (IBBA) data and SBA data which is weighted toward manufacturing, business services, healthcare, technology, and distribution, consistent with U.S. lower- and middle-market deal flow.

When you average across all contributing datasets (IBBA + GF Data + SRS Acquiom + advisory inputs), the blended industry representation behind this data looks roughly like this:

$1–10 Million Total Enterprise Value (TEV)

Companies in this size range are typically owned by founders or families and acquired by individual buyers, search funds, or small private-equity firms. Strategic acquisitions are less common. Buyers rely heavily on bank or SBA financing, which means sellers often provide part of the funding through seller notes or accept contingent payments such as earnouts.

Cash at closing is usually between 80% and 85% with the balance in the form of seller note and/or an earnout. Rollover equity is not common in this segment. When it is present, it typically represents 10% to 15% of the purchase price.

$10–25 Million TEV

As deal size increases, capital availability improves. Banks and lenders are more comfortable financing these acquisitions. Most sellers receive 80% to 90% of cash at closing. Private-equity firms and family offices are the dominant buyers in this segment. Approximately two-thirds of these deals will include rollover equity, typically representing 10% to 15% of TEV. Earnouts are used more often here than in smaller transactions, especially when growth assumptions or customer retention drive valuation.

$25 – 50 Million TEV

Businesses in this range tend to have professional management, diversified customers, and reliable financial reporting. Buyers are most likely to be private equity firms with committed capital and strategic acquirers. Cash at closing averages in the mid-80% range. Rollover equity equal to 10 - 15% of TEV is prevalent in private equity deals. Seller financing is far less common because lenders are willing to underwrite based on company performance. Earnouts may be included, but they are small, well defined and usually limited to 2 years. They may be tied to specific transition milestones such as implementing the acquirers ERP system.

$50 – 100 Million TEV

At this level, the buyers are almost entirely private-equity groups or larger strategics. Sellers often retain a meaningful equity stake to align with the next growth phase, and the structure begins to look more like a traditional institutional recapitalization. Seller cash at closing is typically 85-95% of TEV. Rollover equity is common. Seller notes and earnouts are far less frequent.

$100 Million + TEV

Large private companies and public company carve-outs dominate this range. Strategic buyers and large-cap PE funds often pay with a combination of cash, stock, and rollover equity to align management incentives.

Sources

The data presented here is from a variety of public and private sources, all of which are imperfect. Unlike public companies, private companies are under no obligation to report the terms of sale transactions. The data sources used here reflect aggregated transaction reporting from:

• International Business Brokers Association (IBBA) Market Pulse Reports - cash vs. seller-financing by size (through 2024 Q4)

• SRS Acquiom 2024 – 2025 Deal Terms Studies - earnout prevalence, duration, and structure trends

• GF Data (via Association for Corporate Growth, Middle Market Growth) - rollover equity usage and average percentages

• Financial Poise (2024) - seller-note rate and term norms

• Reuters / M&A Wire (2025) - stock consideration trends among public strategic buyers

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About Venture 7 Advisors:

Venture 7 Advisors is a team of merger and acquisition advisors who assist the owners of small and mid-sized companies to plan and complete the sale of their business. We find the best buyer to meet each business owner’s financial and legacy goals. We represent clients in consumer products, distribution, manufacturing, B2B services, construction, telecommunications, and eCommerce from offices in Burlington, Vermont, the Hudson Valley, New York, and Western Massachusetts.    

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Bryan Ducharme

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