Provided by: Jennifer Kirschenbaum, Esq.
October 19, 2017
I got an offer for my billing company; buyer offered 2 months gross revenue on closing and then a payout over 3 years secured by a right to my business back on default.
Thoughts? I'm nervous this is a bad offer.
Thanks in advance,
Well, without more information on the size, value (strength of client contracts, etc.) and profitability of your company, or your personal circumstances on whether you need an exist fast, I will say this seems to be a below-average industry offer. I typically see much more paid on closing, a Note for the remainder with a personal guaranty and some additional security offered (of course I prefer real security with equity). If you are not in a rush you may want to go back and renegotiate, or walk.
The reversion right does not offer much consolation in my mind, because what good will that do if: (i) you have no interest in stepping back in to operate; and (ii) your business is destroyed from poor management and attrition post-closing.
Happy to discuss specifics offline.