01 · Research
Executive Summary
Deal structure is a primary lever in digital M&A. How consideration is split between cash at close, earnout, rollover equity, and seller notes directly affects the risk profile for both buyer and seller. Understanding market norms for each component allows both parties to negotiate from an informed position and avoid structures that are commercially unusual or legally fragile.
02 · Research
Structural Archetypes
| Structure | Typical Use Case | Buyer Profile |
|---|---|---|
| Cash Heavy (>80% cash) | Stable, profitable business with clean financials and low integration risk. | Strategic acquirer or PE with high conviction. |
| Cash + Earnout | High-growth business with uncertain forward performance. | Buyer wants to share risk on future performance. |
| Cash + Rollover | Founder-led business where key person retention is critical. | PE or strategic acquirer wanting founder aligned post-close. |
| Majority Recap | Founder wants liquidity but retains upside in a second bite. | PE firm executing a majority recapitalization. |
| Growth Equity | Business needs capital to scale, founder retains majority control. | Growth equity or venture investor. |
03 · Research
Earnout Benchmarks
| Parameter | Market Range | Note |
|---|---|---|
| Prevalence | 40-60% of digital deals include an earnout | More common in growth-stage and founder-led businesses. |
| Earnout Size | 10-40% of total EV | Higher earnout = more risk transferred to seller. |
| Duration | 12-36 months | Shorter durations are seller-preferred. |
| Trigger Metric | Revenue or EBITDA | Revenue triggers are seller-preferred; EBITDA triggers are buyer-preferred. |
04 · Research
Rollover, Seller Notes & Escrow Norms
| Component | Typical Range | Key Considerations |
|---|---|---|
| Equity Rollover | 10-30% of EV | Governance rights, drag-along, and tag-along provisions are critical negotiation points. |
| Seller Note Interest | 6-10% per annum | Subordinated to senior debt. Typically 2-4 year term. |
| Escrow / Retention | 5-15% of EV | Held for 12-18 months to cover warranty and indemnity claims. |
| Working Capital Peg | Based on trailing 12-month average | Definition of "cash" and "debt" items is the most common source of post-close disputes. |
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About the analyst
Joash Boyton
Founder and Managing Director, Acquiry · Melbourne, Australia · Global coverage
Joash Boyton is the Founder and Managing Director of Acquiry, a specialist M&A advisory firm focused on the acquisition and sale of businesses. He executes buy-side and sell-side mandates from USD $1M to $500M across technology, SaaS, fintech, payments, gaming, blockchain and emerging verticals, and is not limited to them. Any sector, any market.