Acquisition Deal Structure: Strategies for Success

Acquisition Deal Structure: Strategies for Success

Acquisition Deal Structure: Strategies for Success

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Appropriate acquisition deal structure is a powerful way to drive platform growth, but creating them effectively requires clear objectives, well-defined scope, and strategic compensation plans. Whether you’re negotiating with platform owners or rolling up smaller entities, understanding the nuances of acquisition deal structure is critical to ensuring mutual success.

Understanding Acquisition Deal Structure

Before diving into acquisition agreements, it’s essential to answer two key questions:

  1. What’s the minimum that makes the deal worthwhile for you?
  2. What scope of work will you provide in the process?

These considerations set the foundation for your minimum acquisition criteria and ensure your efforts are aligned with your desired outcomes.

1. Define the Platform and Acquisition Scope

In many acquisition scenarios, there are two levels to the deal:

  1. The Platform Company: The primary entity serving as the foundation for growth.
  2. The Acquired Entities: Smaller businesses rolled into the platform to expand operations.

Your role can vary significantly, so it’s crucial to define your scope:

  • Platform Support: Providing strategic guidance, systems integration, or operational oversight.
  • Acquisition Management: Sourcing, negotiating, and integrating smaller entities into the platform.

Pro Tip: Separate the platform deal from acquisition management to ensure you’re compensated fairly for both efforts.

2. Establish Fair Compensation

The right compensation structure reflects your contribution to both the platform’s growth and the acquisitions. Here are some common approaches:

Platform Compensation:

  • Use standardized structures like 10/10/10 or 20/20/20 (10–20% of the monthly retainer, profits, and exit value).
  • Adjust based on your involvement in the platform’s ongoing operations.

Acquisition Compensation:

  • For significant roles in acquisition management, consider a 50/50 split of acquisition benefits.
  • Ensure the platform company has “skin in the game” by committing resources to the acquisition process.

Example: If you’re leading the acquisition process and integrating the businesses, you might negotiate a 50% share of acquisition benefits while maintaining equity in the platform itself.

3. Align Incentives Between Platform and Acquisition

To ensure success, it’s vital to incentivize platform owners to actively participate in the acquisition process.

Why This Matters:
Platform owners often have their focus on existing operations. Without equity or financial investment in the acquisitions, they may deprioritize the rollup strategy.

Solutions:

  • Tie acquisition success to platform equity growth.
  • Require platform owners to fund acquisition efforts upfront (e.g., $10K–$20K per month for the first 12 months).

This ensures alignment and commitment, fostering collaboration and prioritization.

4. Tailor the Deal to Fit the Situation

No two deals are alike. Flexibility is key to structuring equitable agreements that work for all parties.

Factors to Consider:

  • Time Investment: How much of your available time will the acquisitions demand?
  • Value Added: What unique expertise or resources are you bringing to the table?
  • Risk and Reward: How much risk are you taking on, and is the reward proportional?

Pro Tip: Start with a hypothetical transaction to test the financial feasibility of your proposed structure.

5. Examples of Acquisition Structures

Here are two examples to illustrate potential structures:

Scenario 1: Combined Platform and Acquisition Deal

  • Platform Deal: 10/10/10 structure for operational support.
  • Acquisition Deal: Managed as part of the platform agreement.

Scenario 2: Separate Platform and Acquisition Deals

  • Platform Deal: 20/20/20 structure for ongoing management.
  • Acquisition Deal: 50/50 split of acquisition profits and equity.

In Scenario 2, separating the deals ensures you’re not bound to the platform’s compensation limits for acquisitions, maximizing your potential returns.

Final Thoughts on Acquisition Deal Structure

Structuring acquisition deals requires a clear understanding of your minimum criteria, scope of involvement, and desired outcomes. By defining these elements upfront and aligning incentives, you can create deals that benefit all parties while driving platform growth.

Key Takeaways:

  • Clearly define your scope and compensation for platform and acquisition management.
  • Separate platform and acquisition deals when necessary to maximize returns.
  • Align incentives to ensure active participation from platform owners.

With the right approach, acquisition deals can be a transformative strategy for scaling businesses and creating long-term value.

Additional Acquisition Deal Structure Resources:


Ready to explore acquisition strategies that fit your needs?

Book a Free Strategy Session with the EPIC Network to discover customized solutions to support your success.

👉 Schedule Your Free Strategy Session Now

Picture of Meet Roland Frasier

Meet Roland Frasier

Roland Frasier is an investor and business strategist with over 1,000 acquisitions and exits completed for himself and his clients.

His current portfolio companies include real estate, restaurants, business and home services, events, eLearning, e-commerce, franchise and SaaS businesses.

He has been a principle of 6 different Inc. fastest growing companies and serves on the Stanford University Advisory Board for Global Projects and their Family Office Steering Committee.

He has been featured in Business Insider, Fast Company, Forbes, Entrepreneur, Inc, Yahoo Finance and has appeared on all major television networks.

Roland has interviewed Sir Richard Branson, Sarah Blakely, Arnold Schwarzenegger, Martha Stewart, Magic Johnson and other business celebrities, many on his award winning Business Lunch podcast.

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