Price vs. Value: Why the Highest Offer Isn't Always the Best One

Two buyers are interested in your business. One offers $8 million. The other offers $6.5 million. Which one do you take?

If your instinct was “the $8 million offer, obviously” — you're in good company, and you're also not looking closely enough yet. The number typed at the top of a letter of intent is the headline, not the deal. What actually lands in your bank account, and when, depends on a lot more than the figure everyone fixates on first.

The Number on the Letter of Intent Isn't the Whole Story

A purchase price is really a promise made up of several smaller promises. Some of that $8 million might be cash you receive the day the deal closes. Some might be a seller note (a loan you extend to the buyer, repaid over time out of the business's future earnings) or an earn-out (additional payment tied to the business hitting certain performance targets after you've handed over the keys). The bigger the gap between the headline number and the cash-at-close number, the more that “higher” offer depends on things you no longer control.

That's not automatically a bad deal, plenty of well-structured earn-outs and seller notes work out fine. But it's a different risk profile than a smaller, all-cash offer, and it deserves to be evaluated as one.

What Actually Determines What You Walk Away With

Once you look past the headline price, a handful of structural details do the real work of determining your outcome:

Cash at close vs. contingent payments. The larger the contingent slice, the more your final payday depends on a business you no longer run day-to-day, under a new owner's decisions.

Escrow and indemnification. Most deals hold back a portion of the purchase price in escrow (a neutral account) for months or years, to cover any post-closing claims. A buyer with aggressive indemnification terms (broad promises you're on the hook for if something goes wrong later) can quietly claw back value you thought you'd already banked.

Working capital adjustments.

The purchase price you agree to almost never matches what actually changes hands, it gets adjusted at closing based on the business's cash, receivables, and payables. A buyer who lowballs this mechanic can shrink an attractive headline number fast.

Certainty of Close Matters More Than the Number Itself

The best offer on paper is worthless if the deal never closes. Before you fall in love with a number, it's worth asking who's behind it. A strategic buyer (an operating company in your industry) and a financial buyer (a private equity group or investment fund) bring different financing sources, different timelines, and different track records of actually getting deals done. A buyer who needs to line up financing, win over an investment committee, or complete a lengthy diligence process introduces risk that a well-capitalized, motivated buyer simply doesn't.

This is exactly the kind of terrain an experienced M&A advisor is built to navigate, comparing offers apples-to-apples on structure and certainty, not just the number on the front page, and negotiating terms most owners never think to ask about until it's too late.

Before You Compare Offers, Ask Yourself:

✔️ How much of this offer is guaranteed cash at closing, versus contingent on hitting future targets?

✔️ If part of my payout depends on an earn-out or seller note, what happens if the business underperforms after I've left?

✔️ Do I understand how this buyer plans to finance the deal, and how likely they are to actually reach a closing table?

✔️ Have I compared these offers side by side on terms, not just the price on the letter of intent?

The Real Number Is the One You Keep

The instinct to chase the biggest number is natural, it's also exactly why so many owners need someone in their corner who evaluates deals the way buyers do: on structure, certainty, and risk, not just the top-line figure. The same discipline that helps you tell a good offer from a great one is the same discipline that makes a business worth more in the first place. Building a company with clean financials, diversified revenue, and a strong management team doesn't just make you sellable, it gives you the leverage to say no to the wrong offer and yes to the right one.