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What makes an acquisition offer “right” for you?
There is no universal price or scoring formula that makes an offer right. A useful comparison weighs six things: net proceeds, certainty and timing of payment, the buyer’s ability to close, post-close obligations, liability that survives closing, and strategic and personal fit. The last of these depends on your circumstances: whether the buyer’s plan preserves what matters to you, and what realistic alternatives you have if you decline or wait.
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An acquisition may exchange some or all of existing investors’ equity for cash, stock, or a combination. The U.S. Securities and Exchange Commission (SEC) also identifies acquisition as one exit route alongside public offerings and asset liquidation. Those routes are not a ranking of which one is best for a particular startup. The SEC’s overview of exit strategies and liquidity was last reviewed April 24, 2026.
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How do you turn the headline value into your likely proceeds?
First separate the stated purchase value from the amount and timing of what you personally receive. List every form of consideration and every deduction or condition in the agreement; then trace the distributable proceeds through the company’s actual capitalization and transaction documents.
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Inventory the consideration and its timing
- Cash at closing: Identify the amount payable at closing and any conditions that must be satisfied first.
- Acquirer stock: Determine the security you would receive, whether it can be transferred, and whether there is a practical way to sell it. Privately held securities are often illiquid. Public-offering shares may also be subject to lockups depending on the pathway and terms; neither point establishes the value or liquidity of a particular buyer’s stock. The SEC explains liquidity considerations.
- Escrow or holdback: Find out how much is withheld, what claims or conditions can affect it, and when any remainder may be released.
- Seller financing: If the buyer will pay later under a note, check its terms, repayment conditions, and what happens if the buyer does not pay.
- Earnout or other contingent payment: Record the conditions and measurement period rather than treating the stated maximum as guaranteed proceeds.
Reconcile the purchase value to the equity distribution
Use the agreement’s definitions and mechanics to reconcile enterprise or stated purchase value to the amount available for distribution. Check cash, debt, working-capital adjustments, fees, and other adjustments; small differences in definitions or calculations can change the result. Promise Legal’s acquisition guide illustrates these mechanics with a worked example. Its example figures are illustrative, not market averages or standard terms.
Then apply the company’s charter, cap table, investor rights, options, and other equity arrangements. The SEC notes that obligations are paid first in a liquidation and remaining assets go to shareholders according to liquidation preferences. The actual distribution in an acquisition depends on its structure and governing documents, so do not assume a simple pro-rata split.
What should you check in the LOI before agreeing to exclusivity?
A letter of intent (LOI) can describe the deal structure, assets involved, payment terms, escrow, and closing conditions. It may be generally nonbinding while still containing binding provisions. Acquire.com’s seller-process guide says that accepting an LOI can start a no-shop period, limiting discussions or negotiations with other buyers during that period.
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Before signing, ask transaction counsel to identify which clauses bind you and what they require. In particular, review:
- the exclusivity or no-shop period, its start and end, and any extension mechanism;
- termination rights and consequences of ending discussions;
- confidentiality obligations and responsibility for expenses;
- the assets, equity, or business being sold and the proposed deal structure;
- payment terms, escrow, and conditions to closing.
Do not treat the LOI’s headline terms as the final contract. The definitive purchase agreement can add detail, change mechanics, and allocate risks differently.
How can you assess the buyer’s ability and willingness to close?
Ask what funds are available or committed, who has authority to make the offer, and what financing, approvals, diligence, consents, or other conditions remain. Verify the buyer’s identity, acquisition vehicle, financing, and authority independently rather than relying only on a verbal assurance.
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Acquire.com lists a rushed LOI without meaningful engagement and a refusal to show proof of funds as warning signs. They are reasons to investigate, not proof of fraud or inability to close; the guide is marketplace seller-process advice, not a regulatory standard or guarantee about any buyer.
How should you evaluate an earnout or other deferred payment?
An earnout makes some payment depend on targets after closing. Its face amount is not the same as a certain payment: the result may depend on measurement rules, buyer decisions, and events you no longer control.
Pin down the measurement rules
- What metric applies—revenue, EBITDA, customer or product milestones, or something else?
- What period is measured, and what accounting definitions govern the calculation?
- Can you inspect records or challenge a calculation? Are audit or dispute rights provided?
- Are there caps, floors, or other limits on payment?
- How could integration, pricing changes, cost allocations, or operational changes affect the metric?
Promise Legal describes disputes in which buyers changed pricing, allocated costs differently, or consolidated operations. That is a qualitative warning about control and measurement, not evidence of how likely any particular earnout is to pay.
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Check whether payment depends on your continued service
Read whether the payment is conditioned on continued employment or another service commitment. Ask what happens if you resign, are terminated, change roles, or the buyer sells the business. Have counsel review how those events interact with both the payment terms and any employment agreement.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What risks can the purchase agreement leave with you?
The definitive purchase agreement governs the transaction. Review seller representations and warranties, pre-closing covenants, closing conditions, indemnification, termination rights, and post-close price-adjustment rules. Whether the deal is structured as a stock or asset purchase also affects which liabilities, contracts, and consents are implicated.
Pay particular attention to the promises you make about the company and the consequences if a promise is inaccurate. Understand any indemnification caps, baskets, escrow, claim procedures, and survival periods. These terms are negotiated and depend on the agreement and applicable law.
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A Baker McKenzie / Legal 500 guide to U.S. technology M&A describes general representations and covenants as commonly subject to negotiated caps, often tied to escrow, while fundamental representations may have higher limits and longer survival periods. This is a description of U.S. technology M&A practice, not a promise about your deal. Ask counsel to interpret the actual contract under its governing law. The guide was generated September 12, 2025.
What should founders and employees expect after closing?
Clarify what happens to employee equity, unvested awards, bonuses, and retention arrangements. A U.S. technology M&A guide describes possible approaches such as assuming target equity awards, creating bonus pools, or re-vesting awards. These are options, not automatic outcomes. Ask how the proposed transaction treats each group and what approvals or conditions apply.
Separate purchase consideration from compensation
Write down your expected role, reporting line, compensation, service period, transition duties, and termination terms. Separate money paid for your ownership from salary, retention payments, or incentives tied to continued work; ask a tax adviser to review how the deal characterizes each amount.
Review restrictive covenants, including any limits on competing or soliciting employees or customers. Their scope and enforceability vary by jurisdiction, so do not assume a broad non-compete is enforceable everywhere. The relevant guide discusses U.S. technology M&A and cannot establish the rules for every location.
How do you compare the offer with your alternatives?
Compare the deal with credible choices, not an imagined best-case alternative: continue operating, raise more capital, approach other buyers, negotiate a different structure, or decline. The SEC identifies acquisition as one possible exit route but does not say which route maximizes value for an individual startup.
Before negotiating, set personal thresholds for payment certainty, net proceeds, your role, employee outcomes, and future freedom. Fill in the actual numbers from company records and documents, then have transaction counsel and a tax adviser check the assumptions. Public guidance cannot determine your company’s value, tax position, investor consent requirements, or personal priorities.
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