Beyond the Headline Number: Comparing Two Real Offers

The situation

Giulia had spent years as a warehouse worker before she and Franco, who drove long-haul routes for another company, decided to buy a single truck and start hauling freight on their own. Twenty-two years later, that one truck had become a Scarborough-based trucking and warehousing company with a small fleet, a leased distribution yard, and a client list built almost entirely on repeat business. Neither of them had a business degree or a background in finance. They had built the company the way most owners do: by showing up, keeping their word to customers, and reinvesting rather than drawing large salaries.

By their late fifties, both were ready to step back. Their accountant had floated a rough number for years, and when a broker suggested testing the market, they agreed. The first round of interest produced several indicative offers in a range that felt promising. Two buyers advanced to a second round with formal letters of intent: one a competing regional operator, and the other a company backed by a private equity fund, whose lead negotiator on the deal was a director named Ramon. Both offers landed close together on price. Giulia and Franco came to Treadstone Law assuming the decision would mostly come down to which number was slightly higher.

What the two offers actually contained

On a single page, the two letters of intent looked almost identical. The regional operator offered an enterprise value of roughly $5.4 million. The private equity-backed buyer offered roughly $4.9 million. A $500,000 gap sounds decisive, and Giulia and Franco were leaning toward the higher number before their first meeting with our team.

Reading past the headline figure changed the picture. The regional operator's $5.4 million was structured as about $4.0 million in cash at closing and a $1.4 million earn-out — an additional payment made only if the business hit specific revenue targets over the two years after closing, while under the new owner's control and management decisions. The private equity-backed buyer's $4.9 million was almost entirely cash at closing, with a holdback of roughly $500,000 placed in escrow for 18 months to cover any post-closing indemnity claims, and released to the sellers if none arose.

These are two very different transactions wearing similar price tags. An earn-out shifts real risk onto the sellers: Giulia and Franco would no longer control pricing, staffing, or which customers the company pursued, yet a large piece of their payment would depend on results generated under someone else's decisions. A holdback escrow, by contrast, is money the sellers have effectively already been paid, set aside only to cover claims that the buyer can actually substantiate under the agreement — and it comes back if none materialize. Comparing the two offers on price alone would have pointed them toward the option with substantially more risk attached to a smaller portion of their money.

What we did

1. Built a term-by-term comparison, not a price comparison. We set both letters of intent side by side and broke each into its components: cash at closing, contingent consideration, escrow terms, working capital adjustments, non-compete obligations, and closing conditions. Giulia and Franco could see for the first time that the $500,000 headline gap was not the real gap between the offers.
2. Stress-tested the earn-out structure. We asked the regional operator's counsel direct questions about who would control pricing and customer relationships during the earn-out period, and reviewed the draft revenue targets against the company's own historical numbers, including slower years. The targets assumed growth that matched the company's best year on record, not its average one, meaning full payment was realistically unlikely even under normal conditions.
3. Reviewed the financing behind each bid. The private equity-backed buyer's offer was contingent on the fund's investment committee approving final financing terms, a condition that is common but still meant the deal could still fall through after signing. We asked for evidence of committed financing and a shorter window for that condition to be satisfied or waived, rather than leaving it open-ended through closing.
4. Negotiated the escrow terms down. The private equity-backed buyer's initial draft set the escrow release at 18 months with a broad list of claims it could cover. We negotiated the period down to 12 months and narrowed the claims it could be used against to specific, defined categories tied to the diligence findings, rather than a general catch-all.
5. Reallocated risk in the share purchase agreement. Once Giulia and Franco chose to proceed with the private equity-backed buyer, we negotiated caps on their liability for representations and warranties, carved out known issues that had already been disclosed during diligence so they could not be claimed against later, and confirmed a working capital adjustment mechanism that would not silently erode the purchase price at closing.
6. Coordinated the non-compete and transition terms. Franco had assumed he would simply retire, but the buyer wanted a transition period to preserve customer relationships. We negotiated a paid consulting arrangement for the first six months after closing and a non-compete limited in geographic scope and duration, rather than the open-ended restriction first proposed.

The outcome

Giulia and Franco accepted the private equity-backed buyer's revised offer: roughly $4.9 million, with about $4.4 million paid in cash at closing and $500,000 held in escrow for 12 months against a narrowed list of claims. The regional operator's higher headline number remained tempting on paper, but once the earn-out risk and the realistic likelihood of hitting the revenue targets were accounted for, the two offers were not close at all — the certain cash portion of the private equity-backed deal exceeded the certain cash portion of the other offer by a wide margin.

The deal closed within the timeline the parties had agreed to, financing came through without delay once the shortened condition period forced an earlier answer, and the escrow was released in full twelve months later after no indemnity claims were made. Franco completed his six-month consulting period, was paid as agreed, and the company's customers experienced a smooth handover. Giulia and Franco walked away from the sale with the number they had actually agreed to, not one diminished by a contingent payment that never had a realistic chance of arriving in full.

What you can learn from this