Introduction

If you’re planning your exit on the assumption of a single lump‑sum payment, the UK deal market in summer 2025 suggests you may need to recalibrate. Several successful SME transactions in August worth a combined £120 million+ were structured around a blend of cash and equity. Straightforward “cheque on completion” exits are becoming rare.

For owner‑managers, this shift is not a temporary quirk. Mixed deal structures are steadily becoming the norm. They balance risk more fairly between buyer and seller, especially in a risk‑conscious climate, and they reward sustained involvement through performance‑linked upside. Understanding how to navigate them has become essential if you want to achieve a successful exit at full value.

The decline of the pure cash deal

The traditional playbook — cash on completion and walk away — is no longer the default.

Why?

• Diligence unearths more risks. Buyers are probing harder, uncovering uncertainties that a simple cash price cannot balance.
• Integration matters. Sellers are expected to remain involved for a transition period. Buyers want “skin in the game”.
• Valuation gaps. Where seller and buyer disagree, layered structures bridge expectations.
• Future value. Strategic buyers want sellers to share in both outcomes — positive and negative.

For SME owners, this means preparing for complexity, shared risk and at least some continued involvement. The trade‑off: potential for higher total returns.

Anatomy of a mixed structure

Typical building blocks include:

• Cash component (typically 60–80%)
  Immediate liquidity, recognition of current value, and funds for your personal plans.
• Equity stake
  Aligned interests, potential upside, and a share in synergies. Can be shares, preferred instruments, or convertibles.
• Earnout provisions
  Additional payments tied to revenue, EBITDA, or strategic milestones. Normally 1-3 years.
• Seller note
  Deferred portion of the purchase price, essentially a loan from the seller to the buyer, typically used to bridge valuation gaps or manage the buyers cashflow. Normally 1-3 years.
• Employment or consulting agreements
  Ensures smooth transition and knowledge transfer. May include non-competes or retention bonus.
  

Why these deals work

For buyers:

• Reduce integration risk.
• Manage cash flow.
• Resolve valuation disagreements.
• Share risk while pursuing synergies.

For sellers:

• Potential for higher overall payouts.
• Retain influence for a transition period.
• Tax planning flexibility — e.g., capital gains treatment on equity stakes.

Risks you must manage

Mixed exits aren’t a free lunch. Key challenges include:

• Reduced upfront cash – requires careful personal financial planning.
• Control limitations – minority shareholdings in bigger corporates carry reduced influence.
• Exit complexity – selling equity later may be harder than selling your original business.
• Integration dependence – your upside relies on how effectively the buyer runs the combined entity.
• Legal and tax complexity – documentation thicker, disputes more likely, professional fees higher.

Negotiating to protect your position

Cash

• Push for the highest feasible percentage upfront.
• Insist on payment at completion.
• Resist post‑completion re‑adjustments.

Equity

• Understand rights, protections, and restrictions.
• Negotiate anti‑dilution and tag‑along rights.
• Ensure participation in future liquidity events.
• Plan diversification to avoid concentration risk.

Earnouts

• Tie to metrics within your influence.
• Keep periods short and targets realistic.
• Insert protections preventing manipulation.

Ongoing involvement

• Define your role clearly.
• Separate ongoing pay from deal consideration.
• Include opt‑out provisions.

Sector nuances

• Real estate / asset‑heavy sectors — Predictable cash flows support earnouts; asset valuations must be validated independently.
• Industrial distribution and B2B services — Value is in customer relationships; ensure protection and share in market expansion upside.
• Technology and innovation — Often intensive equity/earnout focus; protect IP and negotiate milestones around usage, revenue or users.

Due diligence and tax dimension

Mixed deals create heavier diligence. Expect:

• More forensic financial reviews.
• Integration modelling.
• Detailed legal drafting (purchase agreements, shareholder agreements, earnout clauses).

Tax matters require equal attention:

• Equity elements may qualify for capital gains.
• Earnouts may be taxed partly as income.
• Deferral brings planning opportunities but also cashflow risks.

Specialist advice is non‑negotiable.

Preparing as a seller

• Build your advisory team: Exit strategist, M&A lawyer, tax adviser, financial modeller, and sector expert.
• Scenario modelling: Stress‑test cash/equity mixes and performance cases.
• Risk assessment: What could derail earnouts or erode equity value?
• Personal planning: Can you live without full liquidity at exit?

What lies ahead

August 2025’s SME transactions are a signal, not an exception. We expect:

• Deal structures to become more complex.
• Longer seller involvement periods.
• Performance‑linked payouts tied to real results.
• More emphasis on shared risk and reward.

For UK SME owners this means one clear thing: preparing earlier, with sharper professional support. Complexity can mean higher valuations, but only if you know how to navigate.

On the ground: anonymised examples

• Manufacturing client (Midlands, £15m turnover): secured a 70% cash, 20% equity, 10% earnout deal. Equity stake doubled in value within two years, but only after careful negotiation of anti‑dilution clauses.
• Services group (South West, £10m revenue): negotiated earnouts tied to customer retention rather than profit margin manipulation. Result: exceeded targets comfortably.

Conclusion

Mixed structures are not about “less cash upfront”. They are about optimising your full return, while sharing risk appropriately with buyers. For many UK SME owners, they may be the most realistic — and rewarding — path to exit. If you’d like to understand your readiness and priorities, we invite you to book a confidential consultation Contact us - let's talk about you and your business. or try our Exit Readiness Calculator Exit readiness calculator.

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About Exit Strategy & Solutions

Ethical, expert, exit advice for UK business owners. We help SMEs prepare, grow value, and execute confidential business sales. Our team combines deep M&A expertise with practical business experience to deliver outcomes that exceed expectations. If you're considering your options, we'd welcome a confidential conversation about your specific situation.

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