Past the headline multiplehow IFA deal structure works.

Ask most founders what their firm is worth and you will get a multiple. Ask them what they would actually receive, when, and on what conditions, and the answer gets vaguer.

That gap is where most disappointment in this market lives. Not in the headline number, which is usually roughly where the founder expected it to be, but in everything sitting underneath it.

My previous article walked through the stages of a sale process. This one goes into the thing those stages are actually negotiating.

The multiple is the least important part of the equation

Two offers can both say six times and be worth materially different amounts. The multiple is a coefficient. What matters far more is what it is applied to, and how much of the result you actually see.

On the first point, the base metric varies by buyer type. Some price off adjusted EBITDA. Some price off recurring revenue. Some, particularly at the larger end, work back from a percentage of assets under management or advice. Each produces a different number from the same firm, and each rewards a different set of characteristics.

So a buyer offering a lower multiple of a more generous base can be paying more than a buyer offering a higher multiple of a tighter one. Comparing headline multiples between offers without normalising the base is one of the most common errors founders make when they first receive competing indicative offers.

The word adjusted is doing significant work in adjusted EBITDA. It means the buyer is restating your profit to reflect what the business would earn under their ownership. Founder remuneration above market rate gets added back. Personal costs run through the business get added back. But so do the deductions: the cost of replacing you as an adviser, additional compliance resource the buyer thinks the firm needs, and any technology or platform spend they consider deferred. Founders tend to anticipate the add-backs and not the deductions.

The four components of consideration

Once the headline value is agreed, it gets broken into parts. In UK IFA transactions in this size range, those parts are usually some combination of the following.

• Cash at completion. Paid on the day, subject to any completion adjustments. This is the only element that is genuinely certain.
• Deferred consideration. A fixed sum paid at set future dates, typically over one to three years. It is not usually performance-linked, but it is normally still at risk against warranty claims.
• Earn-out. Additional consideration contingent on the business hitting defined targets after completion. This is the element that varies most between deals and carries the most risk.
• Equity rollover. Some or all of the consideration taken as shares in the acquiring group rather than cash. Increasingly common with private equity backed buyers, and a completely different risk proposition from the other three.

The split between these is the real negotiation. A founder focused only on the headline can agree a strong number with a weak split and end up worse off than a founder who accepted less up front with more of it certain.

Earn-outs deserve more scrutiny than they usually get

An earn-out asks you to accept payment conditional on performance you will have progressively less control over. That is the central tension, and it is worth being clear-eyed about it.

The questions that matter are structural, not numerical.

• What exactly is the target measured on? Revenue, profit, client retention, assets retained, new business written? Each is influenced by different things, and some are influenced heavily by the buyer's decisions rather than yours.
• Who controls the levers? If the target is profit, and the buyer can allocate group overhead, change your fee structure, or move your firm onto their platform mid-period, they can affect your outcome without doing anything improper.
• Is it a cliff or a slope? An all-or-nothing threshold behaves very differently from a proportionate sliding scale when performance lands slightly under.
• What happens if you leave, or are asked to leave, before the period ends? Good leaver and bad leaver definitions determine whether the earn-out survives, and they are frequently drafted more favourably to the buyer than founders realise.

None of this makes earn-outs unreasonable. They exist because a buyer is being asked to pay today for revenue that depends on relationships that have not yet transferred. That is a real risk and it is fair for it to be shared. The problem is when a founder treats the earn-out as money they have, rather than money they might get.

The adjustments that move the number after you have shaken hands

Heads of terms set a value. Completion mechanics determine what is actually paid against it, and this is where a number can quietly shift between agreement and completion.

Working capital is the usual mechanism. The buyer sets a normal level of working capital the business should have at completion, and the price adjusts up or down depending on where you actually land. If that target is set without proper reference to how your business genuinely cycles through the year, you can lose real money to an assumption made in a spreadsheet months earlier.

Cash and debt treatment matters similarly. So does the treatment of deferred income, which in an advice business with annual fee cycles can be a significant balance and is frequently a point of contention.

Then there is retention against warranties. Buyers commonly hold back a portion of consideration, or place it in escrow, as security for warranty and indemnity claims. That holdback is part of your headline number that you cannot spend and may not receive in full.

What I would push hardest on

If I were sitting on the seller side of a deal in this size range, in order of priority I would negotiate the proportion of cash at completion first, the definition and measurement of any earn-out second, and the headline multiple third.

That order surprises founders. It should not. Certainty is worth more than optimism, and the terms attached to conditional money determine whether it is real money or a number in a press release.

The best-prepared founders I have dealt with came into the structure conversation already knowing the minimum certain sum that made the deal worth doing for them. Everything above that was upside to be negotiated. Founders without that number tend to negotiate the multiple hard, win it, and then concede on structure without registering what they have given away.