What is a purchase price actually made of?
Cash at close, first, and then a series of adjustments and deferrals: a working-capital true-up against an agreed peg, an escrow or holdback securing the seller's indemnities, sometimes an earnout tied to future performance, sometimes equity rolled into the buyer's structure, sometimes a seller note. Two bids at the same headline with different structures are different amounts of money, received at different times, with different risk attached.
This is why bids are compared on price and terms together, and why the structural terms are locked at the letter of intent, while competition still exists, rather than left to the definitive agreement, where it does not. An LOI that fixes the number but leaves the peg methodology, the escrow size, or the earnout mechanics open has fixed the part of the deal that was never going to move and left open the parts that do.
The components are each covered in depth in the linked positions; what follows is the shape of the two that most reliably surprise sellers.
What is an earnout actually worth?
Less than its face, on the evidence. Across private-target deals that carry one, closer to one in five earnout dollars is actually paid (SRS Acquiom, M&A Earnout and Milestone Trends, published 7 July 2026, on a full-year 2025 deal population). An earnout is a bridge over a price gap, and it is also a transfer of risk to the seller over a period when the buyer controls the business that must earn it.
Smaller sellers carry them disproportionately: 24% of private-target deals outside life sciences now include an earnout, up from 19% in 2014, and the share rises to 35% on deals with closing payments at or below $25m (SRS Acquiom, 7 July 2026 and 5 June 2026). The practical discipline is to price a deal on its guaranteed component and treat the earnout as option value, then negotiate the drafting, the metric, who controls the levers that drive it, and what happens on a sale of the buyer, as hard as the amount. The recent case law on earnout disputes, covered in the linked positions, is a catalogue of drafting that seemed fine at signing.
Why does the working capital peg move the wired number?
Because it is nearly universal and nearly always bites: 93% of deals carry a purchase price adjustment mechanism, and where one exists an actual adjustment is made in roughly nine cases out of ten (SRS Acquiom, purchase price adjustment statistics, published 19 May 2026, on transactions closed 2020 to 2025). The peg is the normal level of working capital the business is deemed to need; the closing balance sheet is trued up against it, dollar for dollar.
The arithmetic is not a rounding item. On a $30m enterprise value with a $6m peg, a fifteen percent miss against the target is a $900,000 change in cash proceeds, our own worked arithmetic, shown so it can be checked. The number moves on definitions as much as performance: which items count as working capital, on whose accounting policies, measured when, and who prepares the closing statement. Each of those is drafted months before closing, usually by the buyer's counsel, which is why the peg deserves negotiation while leverage still exists rather than accounting attention afterward.
Escrow and indemnity follow the same logic in smaller print: the basket, the cap, the survival period, and how much of the price sits in escrow are all negotiated terms, and representation and warranty insurance now materially shrinks the escrow on mid-market transactions. None of it is boilerplate. All of it is money.
When does rolling equity into the buyer's deal make sense?
When the seller believes in the next owner's plan enough to invest in it, on terms understood as an investment. Rollover converts part of the price into equity in the buyer's structure, deferring tax and buying a second realization if the sponsor's exit performs. It is genuinely valuable in the good outcome and worth nothing in the bad one, which makes it equity risk, not deferred cash, and it should be sized and diligenced as such.
The diligence runs the unfamiliar direction: the seller underwriting the buyer. What the rolled shares actually are in the waterfall, what protections minority holders carry, what the sponsor's track record of exits looks like, and what happens to the position if the platform is sold, refinanced, or struggles. A seller rolling twenty or thirty percent of proceeds has bought a minority position in a leveraged company; the linked positions cover what that position is worth and the questions to resolve before agreeing it.