The headline price is not the number you keep
Founders frame the headline price like it is the deal. Then wire day comes and the number is six or seven figures lighter. That gap is never luck. It is structure nobody negotiated while there was still leverage to negotiate it.
A letter of intent states a purchase price. It does not state what lands in your account. Between the two sits a stack of adjustments: an earn-out, a working capital peg, an escrow holdback, net-debt items, and whatever the buyer retrades during diligence. Each one is governed by terms that get set at the LOI, weeks or months before close, while you still have competitive tension on your side. By the closing table, the leverage is gone and the terms are what you agreed to.
This guide walks through every piece, in plain language, so you can model the wire instead of the headline.
LOI price versus the cash you receive at close
Here is the rough arithmetic that turns a headline number into net proceeds:
- Start with the headline purchase price in the LOI.
- Subtract the earn-out, the portion parked on future performance you no longer fully control.
- Subtract the escrow or holdback, your own money parked against future claims.
- Adjust for the working capital peg, up or down depending on what you deliver at close.
- Subtract net debt and debt-like items in a cash-free, debt-free deal.
- Subtract any retrade the buyer wins during diligence.
- Account for rollover equity if a financial buyer asks you to reinvest part of your proceeds.
Cash at close is what is left. The difference between a well-structured deal and a poorly structured one, on the same headline price, is real money. It is also almost entirely a function of how hard the terms were negotiated up front.
Where the money actually moves after the price is "agreed"
1. Earn-outs
An earn-out makes part of your price contingent on the business hitting targets after close. The problem is simple: once the deal closes, the buyer runs the business, not you. They control the budget, the headcount, the priorities, and often the very metric your earn-out is measured against.
Plenty of earn-outs never pay in full. If a third of your number is contingent, a third of your number is a maybe. That does not mean earn-outs are always bad. Sometimes they bridge a real gap in views on value. But the milestones, how they are measured, who controls the levers, and what happens if the buyer changes the plan all have to be negotiated hard and in writing. A vague earn-out drafted by the buyer's counsel is a discount dressed up as upside.
2. The working capital peg
Almost every deal sets a working capital target, often called the peg. You are expected to deliver a normal level of working capital at close. Deliver below the peg and the purchase price drops dollar for dollar. Deliver above it and you should be paid for the excess.
Most founders do not know the peg is a negotiation until it has already been used against them. How the target is calculated, what is included, and what counts as "normal" across a seasonal business are all arguable, and the argument is worth real money. This gets settled at the LOI and in the purchase agreement, not at close.
3. Net debt and debt-like items
Most lower-middle-market deals are structured cash-free and debt-free, which means debt and "debt-like" items come out of your proceeds at close. The fight is over what counts as debt-like. Deferred revenue, customer deposits, accrued but unpaid bonuses, unpaid taxes, deferred compensation, and capital leases can all get pulled into the bucket. Every item a buyer successfully labels debt-like is a dollar off your wire.
4. Holdback and escrow
Typically ten to fifteen percent of the price sits in escrow for a year or two as security against breaches of the representations and warranties you signed. It is your money, parked, betting that nothing surfaces. The size of the holdback, how long it is held, what can be clawed back, and whether representation and warranty insurance can shrink it are all negotiable. Left to the buyer, the holdback is larger and longer than it needs to be.
5. Rollover equity
When a private equity buyer acquires your company, they often ask you to roll a portion of your proceeds into equity in the new entity. That means less cash at close and a second bet on a business you no longer control. Rollover can be genuinely valuable, the "second bite of the apple" is sometimes worth more than the first, but it is not cash, and it should be priced and negotiated as the risk it is, not waved through as flattery.
6. The diligence retrade
Between the LOI and close, the buyer goes hunting. Their job in diligence is partly to find reasons to pay less. In payments it is residual attrition or a processor consent nobody flagged. In SaaS it is the customer concentration or the churn that got smoothed over in the pitch. Find one thread, pull it, and the price comes down.
The defenses against a retrade are built before diligence starts: a clean data room, problems surfaced and framed on your terms rather than discovered on theirs, and enough competitive tension that the buyer knows another bidder is waiting if they get cute. A process with one buyer and no tension is a retrade waiting to happen.
It is won at the LOI, not the closing table
None of this gets fixed at the closing table. By then you are deep in a process, you are tired, the buyer knows it, and your leverage is mostly spent. The structure that protects your net proceeds is won at the LOI, before you sign your leverage away.
This is the single biggest reason a specialist matters more than a brand. A banker who has sold a handful of companies learns these mechanics on your deal, with your money. Someone who has closed 200+ deals in payments, fintech, and software has already priced every one of these terms in before you sign, and knows which are worth fighting for and which are noise. That is the whole reason a boutique beats a big bank in the $5M to $350M range: you get the person who has done this hundreds of times working your terms directly, not a junior associate two layers down.
Know your real number before you ever see an LOI
The best protection is to walk into the process already knowing what your business is worth and what drives it. If you understand the factors that move your multiple, you can tell a fair LOI from a low one, and you can see a retrade coming before it lands.
733Park built a confidential valuation calculator on 200+ closed deals across payments, fintech, SaaS, and AI. It shows the factors actually moving your multiple, with the full report sent to your inbox. It is a starting point, not a substitute for a real process, but it puts a defensible number in your hands before the negotiation starts. For the work that happens earlier, see our guide to exit planning 12 to 36 months out.
The mistakes founders make
- Negotiating headline price and ignoring structure. A higher headline with a big earn-out and a long holdback can pay less than a lower all-cash deal. Compare net proceeds, not headlines.
- Treating the LOI as a formality. The LOI is where the real money is decided. Once it is signed, you are negotiating from a weaker position on everything that follows.
- Going in with one buyer. No competitive tension means no defense against a retrade. The acquirer already in your inbox is rarely your best outcome.
- Letting the buyer's counsel define "debt-like." Every undefined term defaults to the buyer's favor unless someone on your side pushes back.
- Underestimating diligence. Deals die and prices erode in diligence more often than in the headline negotiation. Clean the house before you list it.
When to get help
If you are within reach of a transaction, or you already have an LOI in hand, the terms in front of you are worth a second set of eyes from someone who negotiates them for a living. The conversation is short, confidential, and free.
See how 733Park runs a sell-side process or start a confidential conversation.
Frequently asked questions
How much do I actually keep when I sell my company?
Less than the headline price, unless the deal structure was negotiated in your favor at the LOI. Earn-outs, a working capital peg, an escrow holdback, net-debt adjustments, and any diligence retrade all sit between the number on the letter of intent and the cash that hits your account at close. On lower-middle-market deals the gap is routinely six or seven figures. 733Park negotiates net proceeds, not just headline price, drawing on 200+ closed transactions.
What is the difference between LOI price and the money I receive at close?
The LOI states a purchase price, but that price is adjusted before and at closing. Cash at close is the headline price minus any earn-out parked on future performance, minus the escrow or holdback, plus or minus the working capital adjustment, minus net debt and debt-like items, and minus anything the buyer retrades during diligence. The deal terms that govern those adjustments are negotiated at the LOI, when you still have leverage.
What is an earn-out and how much of the price should be contingent?
An earn-out makes part of your price contingent on the business hitting targets after close, when the buyer, not you, controls the business. Many earn-outs never pay in full. As a rule, the larger the contingent portion, the more of your price is a maybe rather than a number. A specialist structures the milestones, measurement, and control protections so the earn-out is achievable, not theatrical.
What is a working capital adjustment in M&A?
Most deals set a working capital target, or peg, that you must deliver at close. If delivered working capital comes in below the peg, the purchase price drops dollar for dollar. Many founders do not realize the peg itself is negotiable until it is used against them at close. Setting it correctly at the LOI protects real money.
Why does the sale price drop during due diligence?
Between signing the LOI and closing, the buyer goes looking for reasons to pay less. In payments it is residual attrition or a processor consent. In SaaS it is customer concentration or churn that was smoothed over. Find one thread, pull it, and the buyer retrades the price. Competitive tension, a clean data room, and a process run by someone who has seen the playbook are what keep the price from eroding.
Who can help me protect my net proceeds in a sale?
A sell-side M&A advisor who has closed deals like yours and negotiates structure, not just price. 733Park is a boutique M&A firm for payments, fintech, AI, and vertical SaaS companies in the $5M to $350M range, with 200+ closed transactions. You work directly with founder Lane Gordon, not a junior associate. The first conversation is confidential and free.