Two offers for the same company can carry the same headline price and be worth very different amounts to the founder. The difference is structure: what exactly is being bought, what the buyer pays with, when it pays, and how much risk it leaves with the seller.
This page explains the main structures one at a time. For each: how it works, why a buyer proposes it, the risk to the seller, and when it suits. The documents that carry these terms are covered in M&A deal documents explained.
The four questions behind every structure
| Question | The main options |
|---|---|
| What is sold? | Shares in the company, or the business and assets |
| What is paid? | Cash, the buyer’s shares, a loan note, or a mix |
| When is it paid? | At completion, deferred on fixed dates, or contingent on performance |
| How much does the seller sell? | 100%, a majority, a minority, or 100% with some equity rolled over |
Everything below is a combination of these answers.
Share sale vs asset sale
How it works. In a share sale, the buyer buys your shares and so acquires the company with everything in it: contracts, staff, licences, history and liabilities. In an asset sale (or business sale), the company sells selected assets and activities to the buyer, and the company itself, with whatever is left behind, stays with you.
Why a buyer proposes an asset sale. To pick what it wants and leave historical liabilities behind.
Seller risk. In an asset sale, contracts and licences may need consent to move, and the proceeds land in the company, not in your hands, so extracting them is a further step. In a share sale, you give warranties about the company’s whole history.
Singapore points. Stamp duty on a share transfer is “0.2% of the purchase price or the value of the shares transferred”, on whichever is higher (IRAS). IRAS describes stamp duty as a tax on documents “relating to immovable properties in Singapore and stocks and shares”. In our reading, that means in an asset sale duty attaches to any property and shares transferred rather than to the whole price. If Singapore property is included, the buyer faces Buyer’s Stamp Duty on it: IRAS says “BSD is tax paid on documents signed when you buy or acquire property located in Singapore”. A qualifying transfer of a business as a going concern is not treated as a supply for GST, subject to conditions including that “A mere transfer of the assets will not qualify as a transfer of business” (IRAS e-Tax Guide on TOGC). For employees, section 18A of the Employment Act preserves contracts where an undertaking is transferred; the Ministry of Manpower lists “Transfer of shares.” among the cases that are not transfers for this purpose. Our explanation is that in a share sale the employer, the company itself, does not change.
When it suits. In our experience most founder-led SME exits are share sales, because the business keeps running untouched. Asset sales suit carve-outs of one division, or a buyer unwilling to take on history. The full comparison is in how to sell a company in Singapore.
Cash vs share consideration
How it works. Cash is cash. Share consideration means part of the price is paid in shares of the buyer (or its parent).
Why a buyer proposes shares. To preserve its cash, and to keep the seller invested in the combined group’s success.
Seller risk. The value of those shares can fall, and shares in a private buyer may be hard to sell at all. Expect lock-up restrictions on when you can sell.
When it suits. When the buyer’s shares are liquid and you genuinely want exposure to the combined business. Value private buyer shares cautiously.
Upfront vs deferred consideration
How it works. Deferred consideration is a fixed amount paid on future dates, for example 80% at completion and 20% a year later. Unlike an earn-out, it does not depend on performance.
Why a buyer proposes it. It spreads funding, and gives the buyer something to hold back if a warranty claim arises.
Seller risk. You become an unsecured creditor of the buyer for the deferred amount. If the buyer runs into trouble, you queue with everyone else. Ask for security, a parent guarantee or escrow.
When it suits. Short deferral periods from creditworthy buyers.
Earn-out
How it works. Part of the price is paid later only if the business hits agreed targets, usually revenue or profit, over a set period.
Why a buyer proposes it. To bridge a gap between your view of the future and theirs, and to keep you engaged.
Seller risk. The buyer controls the business that generates the numbers. Accounting definitions, integration costs and management decisions can all move the result. On tax, IRAS has published an advance ruling that a one-off payment settling one share-sale earn-out was “capital in nature and not subject to tax under Section 10(1) of the ITA”, but the ruling is “binding only in respect of the applicant of the advance ruling and the specified transaction”, so it is not a general rule.
When it suits. When the gap is about genuine uncertainty and you will stay and have enough control to influence the outcome. The full guide is earn-outs explained.
Vendor financing
How it works. The seller lends part of the price to the buyer, usually through a loan note repaid with interest over several years. Also called a vendor loan or seller note.
Why a buyer proposes it. It reduces the cash or bank debt the buyer needs, and lenders may treat it as sitting behind the bank.
Seller risk. Similar to deferred consideration, but often longer and subordinated, meaning the bank is repaid first. If the business struggles under its new owner, your loan is at risk from the very company you sold.
When it suits. Smaller deals where bank finance is limited, with security and a strong covenant package.
Rollover equity
How it works. You sell 100% but reinvest part of the proceeds in the buyer’s acquisition vehicle, so you keep a minority stake alongside the new owner.
Why a buyer proposes it. Common with private equity: it keeps the founder aligned, reduces the cash the buyer needs, and signals the founder’s confidence. Bain notes that in Southeast Asian private equity “operational value creation is now the primary driver of returns”, which in our view is why a PE buyer wants the founder’s continued effort.
Seller risk. Your rolled stake is a minority position in a business you no longer control, often with debt above it. Its value depends on the next exit.
When it suits. When you believe in the buyer’s plan and can afford to wait for a second payday. See trade buyer vs private equity.
Escrow and holdback
How it works. Escrow places part of the price with an independent agent for a set period, released to you if no claims arise. A holdback is similar, but the buyer itself retains the money.
Why a buyer proposes it. It secures warranty or indemnity claims without having to chase you for money already paid out.
Seller risk. Money you have earned sits out of reach. With a holdback, the buyer holds it and decides when a claim is “made”. Escrow with a neutral agent and clear release dates is safer.
When it suits. Almost every deal has some form of retention in our experience. Negotiate the amount, the period and the release mechanics, and make sure the escrow is your only exposure where possible.
Locked box vs completion accounts
These are two ways to fix the final price for cash, debt and working capital.
Locked box. The price is fixed off a balance sheet at a past date (the “locked box date”). From then until completion, you promise that no value leaks out to you (no dividends, unusual payments or fees) except as agreed. The price is known on signing.
Completion accounts. The price is estimated on signing, then trued up after completion using accounts drawn up at the completion date, with adjustments for the actual cash, debt and working capital.
Why a buyer proposes completion accounts. It pays for the balance sheet it actually gets on the day.
Seller risk. Completion accounts invite a second negotiation after you have lost leverage, because the buyer usually prepares them. A locked box gives price certainty but strict leakage rules.
When it suits. In our view a locked box suits a seller with clean, recent, reliable accounts and a stable business. Completion accounts suit a business with volatile working capital.
Majority recapitalisation
How it works. You sell a majority stake, typically to private equity, and keep a meaningful minority. The business is often refinanced at the same time.
Why a buyer proposes it. It buys control while keeping the founder invested and running the business.
Seller risk. You give up control. Your remaining stake will be sold on the investor’s timetable, and drag-along rights may force you to sell when they do.
When it suits. When you want substantial liquidity now, a partner to grow the business, and a second sale later.
Minority sale
How it works. You sell a minority stake, keeping control.
Why a buyer proposes it. A growth investor or strategic partner wants exposure, information and perhaps a path to control later.
Seller risk. Minority investors negotiate protections: board seats, vetoes over major decisions, and rights to buy more or to exit. Read those as carefully as the price.
When it suits. When you need capital or a partner, not an exit.
MBO and MBI
How it works. In a management buy-out (MBO), the existing management team buys the business, usually with bank debt, private equity backing or vendor financing. In a management buy-in (MBI), an outside management team does the same.
Why it is proposed. The buyers know (MBO) or believe in (MBI) the business, and the seller gets a known successor.
Seller risk. Management teams rarely have the cash, so these deals often lean heavily on deferred consideration or vendor loans. You may end up financing your own exit.
When it suits. When continuity and legacy matter more than the highest possible price, and when management is strong.
Partial exits
A partial exit is any structure where you take some money now and keep some exposure: a majority or minority sale, rollover equity, or a staged sale with options for the buyer to acquire the rest later at a formula price. In our experience, the formula for the second stage deserves as much attention as the first-stage price, because by then you will have less leverage.
Worked example: comparing two offers (illustrative)
All figures below are illustrative, for a hypothetical family-owned logistics company. They are not market data.
| Offer A | Offer B | |
|---|---|---|
| Headline price | S$10.0m | S$8.5m |
| Cash at completion | S$5.5m | S$7.0m |
| Escrow (18 months) | S$1.0m | |
| Holdback (12 months) | S$0.5m | |
| Vendor loan note (2 years) | S$0.5m | |
| Earn-out (3 years, profit targets) | S$3.0m | |
| Rollover equity | S$1.0m | |
| Cash at completion as % of headline | 55% (5.5 ÷ 10.0) | 82% (7.0 ÷ 8.5) |
On the day of completion, Offer B pays S$1.5m more (7.0 minus 5.5), despite a headline S$1.5m lower.
Now test the risky parts. Suppose, illustratively, Offer A’s escrow and loan note are paid in full but only half of the earn-out is achieved. Offer A then totals 5.5 + 1.0 + 0.5 + 1.5 = S$8.5m, the same as Offer B’s headline, but received over three years and with more of it at risk. Offer B’s rollover equity could be worth more or less than S$1.0m at the next sale, so its total is also uncertain, just less so.
Neither offer is automatically better. The point is to put both on the same footing: cash at completion first, then each deferred element with its timing and the condition it depends on.
“The day-1 cheque is the number. Everything else is a negotiation you haven’t started.”
Gwee Yi Chen, Growth Alliance Capital
A note on tax
For an individual selling shares, IRAS states that “Gains from the sale of a property, shares and financial instruments in Singapore are generally not taxable”, although trading gains can be. For a company selling shares in a subsidiary, section 13W of the Income Tax Act gives certainty of non-taxation where, for disposals from 1 January 2026, the seller held “at least 20% of the ordinary shares” for “a continuous period of at least 24 months”. The exemption is subject to conditions and exclusions. Notably, IRAS says it does not apply to disposals of unlisted shares in a company that trades, mainly holds or (with limited exceptions) develops immovable property, in Singapore or elsewhere, or to a seller whose share gains are taxed under section 26 of the Income Tax Act, the rules for insurers. Structure changes tax outcomes, so take advice on your specific deal. Nothing on this page is legal or tax advice.
Key takeaways
- Every structure answers four questions: what is sold, what is paid, when, and how much you keep.
- Compare offers on cash at completion first; treat everything deferred as a separate promise with its own risk.
- Earn-outs, vendor loans and deferred payments leave you exposed to a business you no longer control. Seek security and clear definitions.
- Locked box gives price certainty; completion accounts open a second negotiation after signing.
- Rollover equity and majority recapitalisations offer a second payday, on someone else’s timetable.
- Singapore rules on stamp duty, GST and employees differ between share and asset sales. Check them before choosing.