Additional Consideration - Sale of Business
When a buyer and seller of a business cannot agree on a cash purchase price, there are other possible means of filling the gap. Some alternatives are:
- The buyer offers the seller of the business an option to purchase stock in the newly formed corporation at an attractive price that can be exercised over a period of time. The stock can be common or preferred stock.
- The buyer can give the seller of the business preferred, non-voting stock in the new corporation as part of the consideration paid.
- An earnout can be structured in order to provide the seller with additional compensation if the new company"generates revenue above defined levels.
- The buyer can provide the seller with a substantial discount on its products and/or services.
- The buyer of the business can pay the seller a guaranteed consulting fee over a defined period of time for services to be provided.