Why Deal Structure Matters More Than Price in M&A

In 2026, How You Structure Your M&A Deal Matters More Than the Price

If you've been following mergers and acquisitions (M&A) activity this year, you've likely noticed a shift in how deals are getting done. Buyers and sellers are still coming to the table, but they are spending a lot more time discussing how a transaction is structured than on what the headline number will be.

That's not an accident. Instead, it is a direct response to the market we are in right now.

Valuation Gaps Are Real — and Creative Deal Structures Are Bridging Them

Economic uncertainty doesn't make deals disappear, but it does make it harder to close on traditional terms. When buyers and sellers see value differently, which happens a lot in volatile markets, negotiation can stall. The old-school solution was to simply walk away from an M&A deal that had stalled.

The 2026 solution? Use smarter structuring.

Rather than fighting over what a business is worth today, dealmakers are asking a more productive question:

How do we structure this so that value is realized over time, and both sides are protected if things don't go as planned?

The tools being used to answer that question include earn-outs, deferred consideration, and staged acquisitions. These tools are all designed to distribute risk over time rather than force a resolution upfront. Here’s a look at what each of them looks like in practice:

• Earn-outs tie a portion of the purchase price to post-closing performance. The buyer pays less upfront and more later — but only if the business hits agreed milestones. It's particularly useful when there's a genuine difference of opinion about where the business is headed.

• Deferred consideration is simpler: a fixed portion of the price is agreed upon, but payment is spread out over time rather than paid all at once at closing. Unlike an earn-out, the amount isn't contingent on performance — it's just delayed. This can ease cash flow pressure on the buyer and give the seller ongoing financial skin in the game.

• Staged acquisitions take a phased approach to ownership itself. A buyer might acquire a majority stake now, with an option or obligation to acquire the remainder later at a price determined by a pre-agreed formula. This structure is especially common in cross-border deals or situations where regulatory approval, integration milestones, or financing needs to be sequenced over time.

Earn-Outs: The Bridge Between Where You Are and Where You Want to Be

As described above, an earn-out is an agreement in which a portion of the purchase price is paid after closing — contingent on the business meeting agreed-upon milestones. Think of it as a "we'll pay you more if you prove it" mechanism. For sellers who believe in their business, it can be a path to a higher total payout. For buyers, it's protection against overpaying for performance that hasn't materialized yet.

A Real-World Example

One of the clearest illustrations of earn-outs at work comes from the pharmaceutical space. When Novartis sought to acquire a biotech firm, the parties couldn't agree on valuation because the target's primary product — a potential blood-clot treatment — hadn't yet cleared regulatory hurdles. The solution: Novartis agreed to pay $925 million upfront, with up to $2.18 billion in additional payments tied to the drug achieving regulatory approvals and sales targets.¹

That structure, which included a meaningful upfront payment with additional consideration tied to future performance, has become something of a template for M&A deals where value depends on what happens after the ink dries.

In the tech and AI space, we're seeing the same dynamic play out. When a buyer wants the talent and the technology but isn't willing to pay full freight for potential that hasn't yet been proven out, performance-linked deal structures have become a practical path forward. In our experience advising on transactions in this space, milestone-based consideration has increasingly become the tool that gets both sides to yes — not because either party is giving something up, but because it aligns incentives around a shared view of what the business can become.

The Metrics Matter — A Lot

If you're headed into an M&A deal that includes an earn-out, one of the most important negotiations isn't about the dollar amount — it's about what metric triggers payment. Revenue? EBITDA? Customer retention? Each one carries different risks depending on which side of the table you're on.

Revenue-based earn-outs tend to favor sellers because revenue is harder for a buyer to manipulate post-close. EBITDA-based earn-outs favor buyers because they control expenses after the deal closes. Gross profit sits somewhere in the middle.

The metric you choose isn't just a formula — it's a lever of control. And the definition matters just as much as the metric itself. We've seen earn-out provisions that looked straightforward at signing become genuinely contentious once a buyer made post-close operational decisions that affected the numbers. A well-drafted earn-out anticipates those scenarios and builds in protections: caps and floors on the payout, restrictions on how the acquired business is managed during the earn-out period, and clear accounting definitions that leave as little room for interpretation as possible.

The bottom line: a poorly structured earn-out doesn't resolve the valuation gap — it just postpones it, often with interest.

What This Means for Your M&A Deal

Whether you're a buyer or a seller, the structure of your deal in 2026 is as strategically important as the price. A well-crafted earn-out can unlock a transaction that would otherwise fall apart. Deferred consideration can make a deal financially workable for a buyer without requiring the seller to accept less. A staged acquisition can give both parties time and optionality they wouldn't have in a traditional all-or-nothing deal.

At Parsus, we work with clients on both sides of the table to make sure deal structures are clearly defined, legally sound, and built to hold up after closing — not just at signing. If you're navigating an M&A transaction and want to understand how these structures might work for you, reach out to our team.

Sources

¹ S&P Global Market Intelligence, "Private Equity Gambles on Earnouts to Close Exit Deals," November 2025. https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/11/private-equity-gambles-on-earnouts-to-close-exit-deals-94665096