Independence by Design™ #427: Navigating Deal Structures: The Hidden Factors That Impact Your Net Proceeds with Dave Diehl
Most business owners focus on the offer price when selling their business—but the deal structure is what ultimately determines how much you walk away with, when you get it, and how much risk you take on.
In this episode of Independence by Design™, I sit down with Dave Diehl, CEO of Prairie Capital Advisors, to demystify the complex world of deal structures. Dave walks us through the key components of a transaction—working capital adjustments, earnouts, equity rollovers, seller financing—and how these elements impact the final proceeds for a seller.
We also explore how deal structures reflect both buyer and seller goals, and why aligning these goals is critical to a successful transaction. If you’ve ever been confused by the fine print in a deal or wondered why buyers push for certain terms, this conversation will give you clarity and confidence to navigate your own transition.
This episode builds on the foundations from previous episodes, diving into the practical details of how deals are structured and the hidden factors that can significantly impact your outcome. Whether you’re preparing to sell, thinking ahead, or just trying to understand what a good deal looks like, this conversation is packed with insights and actionable advice.
Dave Diehl is the CEO of Prairie Capital Advisors, specializing in helping business owners navigate the complexities of M&A transactions and ESOPs. With decades of experience in deal structuring, Dave has guided countless owners through successful transitions, ensuring their goals are front and center.
Chapters:
- (00:00) Introduction, discussing deal structures, understanding working capital
- (04:11) Impact of working capital on business sales, optimizing cash flow and working capital
- (13:30) Transitioning to deal structures, Prairie Capital Advisors' approach
- (19:15) Balancing ownership and operations
- (27:14) Earnouts and their implications
- (38:32) Valuation and fair value, seller notes in acquisitions, private equity buyers and capital challenges, the role of equity in private equity deals
- (44:08) Risks and realities of private equity investments, including the impact of debt on company growth, challenges with private equity and debt structures, and the importance of evaluating assumptions in private equity deals. Additionally, we'll explore due diligence, partner selection, and the different types of buyers and their expectations
- (53:36) The ESOP option: Benefits and considerations, structuring ESOPs for optimal outcomes, ESOPs vs. private equity sales
- (1:06:44) Estate planning and warrants in ESOPs, operational strategies and value growth
- (1:16:05) Prairie Capital Advisors: Client profiles and services
- (1:20:04) Conclusion and final thoughts
- Rate, comment and share with the owner/operators you know!
Ryan Tansom is a seasoned entrepreneur, speaker, and the founder of Independence by Design™, a transformative ownership framework for growth-oriented business owners. After turning around and selling his family business in an eight-figure exit, Ryan spent over a decade dissecting the lessons learned from his journey. His mission is to help other business owners avoid the pitfalls he encountered by providing them with the tools and knowledge to align their business operations with their personal and financial goals.
With a deep understanding of the challenges faced by owner-operators, Ryan developed Independence by Design™ to empower owner-operators to create sustainable cash flow, grow their company’s equity value, and achieve true independence. He has shared his insights on hundreds of stages, including Vistage, EO, and industry associations, and has reached over 500,000 listeners through his podcast.
Ryan is passionate about helping business owners get unstuck from the day-to-day grind and design a business that serves their life, not the other way around. \
Resources:
Episode 426: "Understanding Buyers: How Ownership Structures Shape M&A Goals with Jeff Buettner"
Independence by Design™ Workshop: https://ryantansom.com/independence-by-design-workshop
Independence by Design™ Ownership Coaching: Ryan Tansom’s Ownership Accelerator programs and coaching https://ryantansom.com/coaching
Ryan Tansom Website https://ryantansom.com/
Ryan Tansom LinkedIn https://www.linkedin.com/in/ryantansom/
Ryan Tansom Twitter https://twitter.com/RyanTansom
Ryan Tansom YouTube https://www.youtube.com/@ryantansom
Ryan Tansom 30-Minute Ownership Strategy Call https://calendar.app.google/tsKk7z6ohugDchWq8
Sound Bites
“The deal structure is where the rubber meets the road. It’s not just about the offer price—it’s about what you actually walk away with.” – Dave Diehl
“Earnouts, equity rollovers, and working capital adjustments can make or break a deal. Understanding them puts you in control.” – Ryan Tansom
“The right deal structure aligns with both the buyer’s and the seller’s goals—it’s a balancing act.” – Dave Diehl