Deal Structure Explorer
Two offers with the same headline are rarely worth the same. A dollar of cash at close beats a dollar of seller note beats a dollar of earnout, because one is certain and now, one is delayed, and one may never arrive. Price the pieces before you compare the stickers.
Price the Structure
The discount rate is your own opportunity cost: what deferred money would have to earn elsewhere to be worth waiting for. A higher rate marks the note down harder.
Cash at Close
$600,000
Seller Note Value
$244,141
$250,000 face
Earnout Value
$75,000
$150,000 at 50%
Headline Consideration
$1,000,000
Every piece at face
Risk-Adjusted Value
$919,141
8% under the headline
The Reading
A $1,000,000 headline is really worth about $919,141 to you, roughly 8% under the sticker: the $250,000 note is worth about $244,141 once its 5-year payout is discounted at your 8% rate (a $5,859 cost of waiting), and the $150,000 earnout is worth about $75,000 at 50% odds of hitting the target (a $75,000 risk cost). A buyer offering more cash at a lower headline can beat this, so compare offers on the risk-adjusted number, not the one in the press release.
All figures are before taxes. Inputs travel in this page's address, so a structure can be shared by copying the URL.