The buyer is offering a lower valuation than our target due to market uncertainty, and we are debating whether to accept an earnout or walk away. How do we use dedicated Thinking Time to structure a contingent value right or a structured rollover as an alternative?

Question

Tyler Smith · Accepted Answer

When a buyer offers a lower valuation than your target due to market uncertainty, you face a critical decision. You can accept a performance-based earnout, which puts your proceeds at risk, or walk away and continue scaling. This is a classic business problem that requires dedicated Thinking Time to resolve.

Instead of accepting a high-risk earnout, consider structuring a contingent value right or a structured rollover with a floor valuation. A contingent value right is a contract that guarantees you a specific cash payment if the business hits certain milestone goals, regardless of who is managing the day-to-day operations.

To determine if this is the right path, sit down with a blank pad of paper for forty-five minutes of uninterrupted Thinking Time. Ask yourself: How might we structure the transaction so that we capture the upside of our growth without giving up control of our operational playbook?

If you cannot negotiate a structure that protects your downside, use your V/TO to re-align your leadership team and focus on scaling the business for another twelve months. Sometimes the best deal you ever make is the one you walk away from.