What alternatives are there to an immediate cash payment and should I be prepared to accept them?
Purchasers may want to defer part of the payment. Clearly this puts you at risk of the purchaser becoming insolvent during the interim period. However, accepting deferred payment may increase the price purchasers are willing to offer, and can be a useful part of your own tax planning. You should ensure that you negotiate suitable security for any deferred amounts.Along with deferred payment, buyers sometimes wish to negotiate an 'earn-out', where part of the price paid is based on the future performance of the business. Again, this exposes you to risk - if the business underperforms - but may increase the price the purchaser is prepared to offer. It is common to negotiate your continued involvement in running the business as part of any earn-out arrangement. Such provisions need careful drafting to ensure that the business has the best possible chance of meeting its targets to ensure the anticipated price is achieved. Careful consideration needs to be given to the tax consequences of such an arrangement.
Purchasers may wish to use shares in their company to pay for the purchase. If so, you will need to establish how much the shares are worth to you and what restrictions apply. Accepting a minority shareholding in an unquoted company can be risky. You will need to check their company's articles of association, and may want to negotiate a suitable shareholders' agreement. Otherwise you could find that you have no control over how they run their business, are unable to sell shares when you wish to, and cannot obtain a good price for them.
