Intro
There’s a moment after closing that nobody warns you about.
The wire lands. The lawyers go quiet. Your advisors send their final invoices and move on to the next transaction. Everyone congratulates you.
And then you discover the deal isn’t finished at all.
Because in most transactions of this size, the number you announced isn’t the number you’ll receive. A meaningful part of it sits in holdbacks and earnouts, paid over the following one to three years — measured by accounting you no longer control, in a business you no longer run.
Meanwhile you’re contractually obliged to help keep that business running for the benefit of the person who bought it.
This is the part of a sale that costs owners the most money. It’s also the part they prepare for least.
Your leverage inverts at close
Up to signing, you hold something the buyer wants and hasn’t got.
The moment the first cash moves, that reverses completely.
They own the products. They own the customer relationships. Your best people are being hired across or leaving of their own accord. Your revenue has gone with the things you sold, but you are left with costs, a dismantled team, and years of uncertainty.
And you now need things from them: the transition period handled sensibly, the holdback released, the earnout calculated fairly.
And, you have almost no leverage left
The three things that decide your money
Holdbacks
A portion of the price — typically 15–30% — held back for a period, typically 1-2 years, against warranty claims and indemnities.
The questions that matter aren’t about the amount. They’re about the mechanics. What triggers a claim. Who assesses it. What the threshold is before anything can
be deducted. Whether there’s a cap. How disputes get resolved, and by whom. And critically, what happens if the buyer simply doesn’t release on schedule.
A holdback with vague release conditions is not 30% of your price held safely in escrow. It’s 30% of your price subject to someone else’s judgment.
Earnouts
The part of the consideration contingent on post-close performance.
They look attractive because they make the headline number bigger, sometimes multiples of the initial purchase price. They’re attractive to the buyer for exactly the same reason — and because they shift risk onto you at the precise moment you can no longer manage it.
Consider who controls the inputs. They set the budget. They allocate shared costs. They now direct the sales effort. They decide what gets invested in and what gets deprioritized. They may reorganize the unit entirely, or fold it into something larger, at which point the thing being measured no longer exists in a recognizable form.
None of that requires bad faith. A buyer making entirely rational decisions about their own business can extinguish your earnout without ever intending to.
What to fix before signing: the exact metric and how it’s calculated. The measurement period. What costs can and cannot be allocated against it. What happens on reorganization, disposal or change of control. What information you’re entitled to receive, how often, and in what form. Your rights of audit or challenge. And whether there’s a floor.
Transition Services Agreements
You agree to support the buyer for a period after close — systems, back office, customer transition, whatever they need to operate what they’ve bought.
This is usually negotiated last, in the closing documents, when everyone is tired and focused on the headline. Which is exactly why it’s so often a disaster.
“Reasonable support” is not a specification. Nor is “such assistance as may be required.” Both mean whatever the buyer decides they mean once the money has moved.
Meanwhile, you’re providing that support with a shrinking team, from a business whose revenue left with the sale, while your own people look for their next job.
What to fix before signing: duration, and what happens if it overruns. What’s in scope and — more importantly — what’s explicitly out. Named headcount and response times. What it costs them if they ask for more. How it ends. And, if you can get it, a fee that reflects the real cost of providing it.
Nobody in the room is thinking about this
At the point these terms are drafted, the buyer’s team is experienced, well-resourced, and has done this many times.
Your side is exhausted. You’ve spent months in diligence. Your lawyer is focused on the warranties and indemnities, as they should be. Your banker is focused on getting to close, because that’s when they’re paid.
And you are focused on the headline number, because after nine months, that’s the thing you’ve been living for.
The post-close mechanics get maybe two percent of the attention. They frequently determine twenty percent or more of the money.
What good looks like
The owners who do well after close have usually done four things.
They negotiated the post-close terms as part of the price, not as an afterthought. A lower headline with clean, certain payment terms often beats a higher one loaded with contingency.
They kept someone in the room after signing. Not the banker, who’s gone. Not the lawyer, who’s on to the next matter. Someone whose job is the outcome rather than the transaction.
They retained the people they’d still need. The finance person who calculates the earnout. The ops lead who delivers the TSA. Both will have offers elsewhere the moment the deal is announced, and neither is easy to replace mid-transition.
They planned for the year after the sale before the sale happened — including what they personally would be doing, and whether they had any obligation to keep doing it.
The principle
Everything that determines your post-close money is decided pre-close, while you still have something the buyer wants.
Afterward you’re negotiating from a position of having already handed over the only thing you had.
The money you lose after the deal is lost in the drafting.
Which means the time to think about the eighteen months after close is not eighteen months after close. It’s before the letter of intent — when it’s still just a paragraph, and paragraphs are cheap to change.
