Survey Deal Terms 2025: Acquisitions partly on the cheap

The vast majority of acquisition transactions in SMEs currently involve some form of deferred payment. This involves combining a cash amount with an earn-out construction, a subordinated loan from the seller - or both.

This is the main finding of the Deal Terms survey, the annual study by acquisition platform Brookz into the deal terms of acquisition transactions in SMEs. The survey was held for the third time this year. 255 acquisition lawyers participated and a total of 937 purchase agreements were scrutinized.

Weakened bargaining power


Despite all the uncertainty in the world, the number of business sales and average sales prices have remained virtually unchanged at high levels in recent years. But in the process, there has been a steady weakening of sellers' negotiating power. In line with that trend, the number of deferred payment transactions has again increased over the past 12 months.


This applies to both the earn-out construction (38%) - in which the sale proceeds partly depend on future results - and the construction with a subordinated loan from the selling party (29%). And almost a quarter of all transactions even included both an earn-out construction and a subordinated loan. The number of transactions in which the acquisition was paid in full in one go was only 9% last year. A sharp decline compared to the 17% full payments in 2024.

Deferred payment usance


Not only has the number of earn-outs and subordinated loans increased. The share of the total purchase price affected by these deferred payment constructions has also risen sharply. For example, the share of earn-outs in the total purchase price rose from 34% to 43% and the share of subordinated loans in the total purchase price rose from 28% to 31%.

According to Peter Rikhof, founder of Brookz, the weakened negotiating position of sellers is a direct result of the uncertain economic outlook. 'Because sellers are holding on to the current high price level, it is logical that buyers want to hedge as much future risk as possible. Earn-out constructions, staggered payments and subordinated loans have therefore now become commonplace in the current takeover market.'

More collateral


In addition, buyers and investors remain firmly committed in other ways to placing as much risk around a transaction as possible on the selling party. To ensure that any claims against the seller can also be recovered, buyers are demanding more collateral. In particular, conditions such as an asset conservation statement (75%), a settlement with the vendor loan (42%) and a personal guarantee (21%) are more often included in purchase contracts.

And to prevent the selling entrepreneur from re-entering the same industry within the foreseeable future, 98% of all purchase agreements include a non-compete clause for a period of 1 to 3 years, up 4% from last year.

Outlook


Judging by purchase price and deal terms, 54% of the M&A lawyers surveyed felt that in terms of negotiating power, there was a buyer's market over the past six months. The expectation for the next six months is that the balance does shift slightly in favor of the seller in the coming period, but still 52% of the lawyers think that buyers have the best negotiating position for the next six months as well.