Deal Structure Options

Strategic Insight: The right deal structure can significantly impact the overall value you receive, your tax obligations, and your post-sale involvement. At Short Partners, we tailor deal structures to meet both financial and personal goals of selling business owners.

Common Deal Structures in Australian Business Acquisitions

1. Asset Sale vs. Share Sale

Asset Sale

Description: The buyer purchases specific assets and liabilities of the business, but not the legal entity itself.

Advantages:

Buyer can select which assets to acquire
Avoids inheriting unknown liabilities
Buyer receives stepped-up tax basis in assets
More common for smaller businesses

Disadvantages:

Higher stamp duty costs in most states
More complex contract documentation
Need to transfer licenses, permits, contracts
Potential GST implications (unless sold as going concern)

Share Sale

Description: The buyer purchases the shares/equity of the company, acquiring the entire legal entity including all assets and liabilities.

Advantages:

Simpler transaction process
Business contracts often continue without assignment
Potentially better tax treatment for seller (CGT concessions)
No GST implications on share transfers

Disadvantages:

Buyer assumes all liabilities, including unknown ones
More extensive due diligence required
Buyer doesn't get stepped-up tax basis in assets
Tax losses may be lost under continuity of ownership tests

2. Payment Terms and Timing

Payment Structure	Description	Best For
All-Cash at Closing	Entire purchase price paid at settlement	Sellers seeking clean break; smaller transactions; businesses with very stable performance
Vendor Finance	Seller provides loan for portion of purchase price	Expanding buyer pool; maximizing purchase price; businesses where buyers need transition support
Earnout	Additional payments based on future business performance	Bridging valuation gaps; growth businesses; situations with significant untapped potential
Deferred Payments	Fixed payments on predetermined schedule	Businesses with steady cash flows; buyers with limited initial capital; tax planning objectives
Hybrid Approaches	Combination of the above structures	Complex situations; larger transactions; balancing seller's desire for certainty with buyer's risk tolerance

Payment Structure

Description

Best For

All-Cash at Closing

Entire purchase price paid at settlement

Sellers seeking clean break; smaller transactions; businesses with very stable performance

Vendor Finance

Seller provides loan for portion of purchase price

Expanding buyer pool; maximizing purchase price; businesses where buyers need transition support

Earnout

Additional payments based on future business performance

Bridging valuation gaps; growth businesses; situations with significant untapped potential

Deferred Payments

Fixed payments on predetermined schedule

Businesses with steady cash flows; buyers with limited initial capital; tax planning objectives

Hybrid Approaches

Combination of the above structures

Complex situations; larger transactions; balancing seller's desire for certainty with buyer's risk tolerance

3. Earnout Structures

Earnouts are particularly common in the Australian $1M-$1.5M EBITDA market segment and typically structured as follows:

4. Transition and Non-Compete Arrangements

Beyond the financial structure, several other components typically form part of the deal:

How Short Partners Approaches Deal Structuring

At Short Partners, we take a flexible approach to deal structuring, recognizing that each business and owner has unique needs:

This guide is provided for informational purposes only and does not constitute financial or legal advice. Individual business situations may vary significantly. We recommend consulting with qualified financial and legal advisors when planning your business sale.

Understanding Acquisition Structures for Australian Business Sales