What is the max percent of the deal you have seen financed with a seller note

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March 01, 2020

by an member from University of Virginia-Darden - Darden School of Business in Homewood, AL, USA

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Reply by an intermediary
from Wake Forest University in Winston-Salem, NC, USA
Good question. According to the latest report from the M&A Source's Market Pulse, the average for 2019 was 12% for transactions under $2 mm, 11% for transactions $2 - $5 mm, and 7% for transactions $5 - $50 mm. That said, it also varies by industry, and most importantly by company and buyer specifics. I have seen as much as 50% seller finance (I have seen buyer's offers as high as 90%, but they haven't been accepted at those levels). The amount is generally inversely related to the financial strength and bankability of the company, somewhat inversely related to seller's age, health, and retirement plans/needs, and directly related to the buyer's financial strength and experience.
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Reply by a searcher
from Dartmouth College in Austin, TX, USA
I know of a deal where seller's agreed to a long-term seller note (~10 years), paid annually, with very little consideration paid upfront. They didn't need liquidity in the near-term and liked the idea of spreading out cash flows for tax efficiency. I think it's very seller-dependent!
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