Lastly, as deferred payments are effectively debt, the question of interest rates comes up. This is handled on a case by case basis and the most often outcome is that deferred does not carry an interest rate. Often instead, the inverse of Flexi Deferred is to pay out the deferred fast should EBITDA rise which is the most likely outcome. This is good for both parties. Excess Cash - Surplus to operations Cash/Working Capital can often be added to the sale price and closing payment. This is basically profits the Seller has not extracted yet that are added to the sale value as a tax-saving mechanism. (see chapter on this subject) Director Loan Write-Off - Often any director's loans on the balance sheet can be included in the business sale creating a Capital Gains Tax (generally 10% or 20%) effect instead of the Seller paying dividend tax which is normally declared to clear them at a year-end. Earn Out - These are payments based on milestones. We usually use them for revenue/profit that is over and above what the Seller is paying for based on normal business operations and the calculations based on EBITDA that were used to derive the valuation. Sellers Post Sale Salary- Generally the Seller stays in the business for a period of time and is paid a salary for doing so. Shares in a Buyer’s Business - Sometimes a Buyer includes shares in their larger entity as part of the compensation for the sale. This is most common where the Seller is going to stay in the business for several years after the sale so wants a piece of the action. Retention of Shares in the Seller’s Business - Occasionally the Seller will retain a small shareholding in their own business as a minority shareholder.
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