#346 Negotiation, Deal Structuring and Funding: What's Actually Working Right Now

Hello, this is Jonathan Jay, and welcome to Business Buying Strategies, which of course is the number one podcast for people interested in buying a business successfully. Now, this week you are going to listen in on part of a webinar that my right Hand deal Making Man Martin did with a group of clients all about deal structuring and funding, and you'll hear the inside track on what is working right now in 2026. I hope you enjoy it. So very quick background then, and then we'll get into some of the fun stuff is I joined Deal Makers back in 2020.

If you want the full story, it's on YouTube with one of Jonathan's earlier. We've now gone on and bought multiple accounting businesses, use that to then leverage into other businesses, and the short story is right now we're currently personally at Heads of terms with eight companies and we should be at 10 by the end of next week. Fingers crossed. And that's all completing in January through February.

Now, the reason why I'm saying that is not for you to sit there and go, oh my God, isn't Martin great? It's because so many people use the budget as an excuse to take their foot off the gas. We used it as an excuse to go harder. So how many of you have ever heard a guy called Zig Ziglar?

Okay. If you haven't, go study him. Great Sales master from the seventies, eighties, and probably even the fifties. I had the privilege of seeing him in 2003 just after the big dip market was recovering again.

And he had a great lesson that I've always used, and that's what I used with that is this. In a recession, if you take the Great Depression, or even COVID, the market retracted 10 to 12%, but half your competitors go bust. So how dare you not double your business? Isn't that a great mindset?

Now, the only difference between those people who don't and those who do is those who take action and you cannot fail if you taking off action. And that's what we did. So what I was gonna talk about today is it's always works better when there's lots of interactive questions. So I'm gonna spend maybe five, 10 minutes talking about a bit of negotiation stuff.

Because we had a few questions. I thought it'd be good to tie it all together and then spend the rest of the time taking questions from you guys on real world examples. You're dealing with que problems you're dealing with right now. And then if we run outta time or have extra time, I can go through some ticks and tricks and that sort of stuff, if that works for everyone.

Okay, cool. So the first thing when it comes to negotiations. And I'm gonna share this from yesterday is be prepared for everything and expect the unexpected. So how many of you think that you know, it's, you need to be, make sure you know everything there is to do.

You need to be fully prepared before you take any step of action. Come on, be truthful. How many of you're scared to take that first call or were scared? Okay.

How many of you are not gonna put your hands up? Because everybody is terrified of that first call. But yesterday what happened is I've done negotiations now we've helped do over 250 acquisitions for people. We're up to 15, 16 hour sales, plus the ones, we've got heads of terms.

Myself and David, we're visiting this company that does metal treatment. And we spoke to the young partner. Now, the young partner had a big white beard. Really, really nice guy.

And was 73 and he was the young one. Absolutely amazing guy. And he is talking about this, all the coatings they do and how they've seen a dip in the o in the oil sector that they work with. And I asked the question, do you think that's gone to Norway?

And he was like, possibly. He's like, but we, we don't deal with Norway. And I turned to David. I was like, well, that's a benefit for us because if we start targeting Norway, I spent three years in Denmark, as David knew, and I speak Danish now.

How many people have been to Scandinavia for any sort of period of time? Norwegian and Danish are very, very similar. It's kind of like Scottish to English. It is just a bit of a different dialect almost.

And the odd, ch weird word that changes. So I said to David, well that's really cool 'cause when we talk to 'em in in Norway, we'll know what they're saying and they won't know. 'cause I speak Danish. Now here's the thing.

Denmark has a population of 5 million people. There are 6 million people in the world who speak Danish. That is 0.07%.

Did the bloody cellar not turn round in in Danish and go, oh, you speak Danish. Fantastic. I live there for five years. Where did you live?

And start talking in Danish. Now I speak Danish. I read Danish. I haven't done either since 2006.

Luckily started talking to him. He's like, should we just do the rest of the day in Danish? And I was like, we can, but David doesn't speak Danish. So there's two lessons from that.

One is, be genuine. Don't bullshit because you don't know if someone's gonna catch you out. And the other is, be prepared for the unexpected and take it on the chin that you cannot be to the point where you are prepared for every outcome. Because how many people would've expected that that person would've been one of the 6 million out of 8.

4 billion? That also spoke Danish. Okay? But it also, it was a great way of building rapport.

I can tell you that. The other thing I would say when it comes to negotiation is always look for the win-win, win. So when you negotiate, in my mind, there is always three things you can do. You can get it cheaper.

How many people like to get it cheaper? Okay. That gives me a good idea who's not putting their hands up regardless. Okay.

You can get it cheaper. You can improve the terms. So if you had to pay 2 million pound for a business, how many of you would prefer to pay over 10 years instead of two? Okay, good.

So this, right guys, what do I have to do to get you to put your hand up? Come on. No, seriously. Then the other thing you can do is get more for your money.

So how many of you have ever bought a car? Thank you. Go. So if you get good at negotiating a car, you'll negotiate the price of the car, get it right down to the bottom, and then you'll start saying, well, what about a tank of fuel?

What about my first service? What about car mats? What about a boot liner? And what you're doing is you're getting more and more for your money.

So when we negotiate, we're always looking to either get it cheaper. Get it better terms or get more for your money. And as long as you can do those three things in a way that's a win for them and a better win for you, that is how you make them feel great and you walk away walking on a cloud. Makes sense.

Now here's the thing. How many of you think all the deal structures we do are amazing? Cool. It's not that hard.

The trick bit is negotiating them, which is why we thought we'd focus on that today because again, just as a base principle, the price is less important than the deal structure. So to give everyone an idea of one of the deals that we've negotiated, we, we were talking different options when we were arriving on a solution, and we had basically agreed that we'd consider four different ways of buying the business. The lowest one value the business at 1.2 million.

The highest one value the business at 3 million. Now, does everyone agree that's quite a range? Did the business change? The only variable that changed was the deal structure.

Now, ironically, which deal structure do you think was best for us? The 3 million, and that's the one that we've agreed. And on the 1.2 we made a hundred grand a year while they were paying the deferred.

On the 3 million, we make 400 grand a year while we pay the deferred. It's all about the deal structure. Okay, so questions on negotiations, deal structuring, and then I can go through some other tricks on how you get there. If you run outta questions, there are 150 people in the room.

I promise you the first person will get a round of applause. We're gonna try and get the mic around if we can. And I should say, although I've got my glasses, they're actually the wrong specs. So if I can't read your badges from here, just introduce yourself first with your name so everyone knows.

Yeah, my name's Javid. Hey, how are you? And it wasn't really about the deal structure. I was just thinking about that tenure deferred.

What happens if you exit before the end of the term? How does that work for the seller? Great question. You put it into the SPA, the share purchase agreement that if you sell the business.

You'll pay them in full. So the deal I'm talking about where it's 3 million, we know that that business, we're paying roughly three and a half times, then their ebitda. Now do not focus on multiples because that deal structure, we're giving 'em about half a million upfront. That's all funded through the debt book, and then we're paying them the interest on a loan note arrangement that we've got.

This is an advanced deal structure. Guys don't run out and do this on day one, but we've already got six or seven other businesses that are coming to heads of terms. We know that group is gonna be worth a multiple of about eight to 10 in the next two to three years. So we've agreed that we're gonna pay them a hundred grand a year interest on that loan note and pay the loan note off in five years, knowing we're gonna sell the business at a much higher multiple in three years.

So we're getting the profit in the cash flow now, and we'll probably sell that business, fingers crossed in three years time at about six to seven, and we'll just bank the extra three mil. While making 800,000, 900,000 in the meantime. So your answer is really simple. You just put it in there that you'll pay them on the, if you sell the business they need to get paid before you get paid, and you, most of 'em are really happy with that.

But a 10 year deal is really, really rare unless you structure it really well. But great question. , I've got a question on the back of, um, Harry and Tim's, one of Harry Tim's deals. They said they took the two point something out of the bank account and then they asset financed half to a deal fee and half, uh, to work in cap.

I guess my question is that feels like for myself, obviously first deal it'll be over leveraging a business. Can you over leverage a business and at what point are you over leveraging the business? Great question. Does everyone understand that question?

Yeah. So the question was, is how were they able to take that money out and finance it without over leveraging the business? Well, the details behind that one is, is that the, the equipment on the balance sheet was massively undervalued. So the balance sheet was undervalued by a significant margin, so we could leverage against that.

The other thing is, is the answer truthfully is make sure you've got the right advisors on your team. So one of the things we always look at when we're looking at a deal is not just what can you, can you afford, but what can you cash flow? Because there are some lenders who will have what's called the debt service cover ratio at 1.5, and that means for every one pound a monthly repayments, you've gotta have 1.

5, one pound 50 of net profit to pay it with. There are some lenders that will go one for one based on your ebitda, which means you're gonna run at a loss Now. That's a bit stupid, the nicest possible way. If you buy a business and you're deliberately running at a loss, I will say right now, we will not represent you or help you.

I'm not here to help anyone buy a business that's running at a loss, just to liquidate it to get the seller. That's what's called a win lose. They win, you lose. So the answer is get the right professionals around you who will help you personally.

I would always look at what's been the lowest cashflow point over the last two years. If you assume the business is gonna drop 10%, if you breach that, you're probably over leveraging it. But it depends upon the business itself. 'cause it's not always based upon the business you're buying, it's based upon the group that you have.

'cause you can buy a business that makes 300,000 net profit on, on day one, make turn it around to 600,000 net profit just by the synergies with the rest of your group. Now that one, you can leverage a lot more than if you can't do that. Make sense? Does everyone know what leverage means?

Just checking. 'cause it is a financial term and sometimes terminology can confuse people. And even though I try and keep things jargon free, sometimes you just forget things are jargon. Great question, Emma.

Appreciate it. The big thing is make sure the businesses you buy are going to succeed 'cause you know what you're doing with them or you've got the right team around you who know what they're doing. So there is a trick that I'll just share with you guys. Is, how many of you would say that you are very good at operating a business?

Okay, cool. How many of you would say you're really good at sales? Okay. How many of you say you're good at neither?

You're good at neither. You can't do sales and you can't operate a business. Okay? I know some of the guys who are putting your hands up.

That's not the case. But if you can't do either, you're lying to yourself. If you can't sell and you can't operate, you shouldn't be in business unless you're an accountant, in which case you're good with the numbers and nothing puts a business outta business faster than putting an accountant in charge usually. I'm actually deadly serious there guys.

Unless you've got someone like Johan who's more management specialist than accountant. Accountants are terrible at running a business. They run it by the books, not the people or the systems or the sales. Accountants will tell you, don't push your sales too hard 'cause we don't want to grow too fast.

So yeah, if you are good at operating, buy a business that's solid on sales. 'cause they'll have a really good sales system, but there'll be absolute garbage operating it. And they'll be running by the seat of the pants. They'll be putting fire outs all the way through.

And if they're good at operations, but rubbish at sales, it means you can put a sales system in and instantly increase the business like that. It really can happen that fast and they're good ways of just really catapulting those businesses forwards. Does that help everyone? Great question Emma.

Really appreciate it. Hi, . , The different components of, , financing. If there's a hundred deals that use financing, it'd just be useful to know what, , the easiest and most popular options.

I've always used invoice finance, but everything else is kind of a dark art. So you mentioned asset finance and cashflow finance and so on. It'd just be useful to talk about which ones you see most commonly being successful. Great question.

So what, the question there was is there's loads of different ways of financing a deal. Which ones are the most common? Well, my preference is always none. Now, as a finance broker who gets paid for arranging finance, that's probably not the answer you're expecting.

But if you can structure a deal where there are no finance involved and it is 100% deferred on a performance based exit, I will always tell you how to do that and make that happen because that is the safest way of doing the business, and it allows you to then leverage it when you do a bigger deal if you need it. In terms of ease, the easiest ones are bridging for property and invoice financing. They're the two easiest ones. You will do invoice financing.

Companies do not care if you're buying a loss making business as long as you've got a plan. They will lend a loss making business the money because they're simply financing the invoices and the risk isn't too big. Then you have asset financing as the next common one after that, and that is where you're basically taking an asset, whether it's a digger, whether it's a car, whether it is a piece of machinery, and you're financing and raising money against that asset. Now, in order to do that, they have to own the asset and not usually have any finance outstanding on it, or you have to pay the finance back first.

At the same time, the one to avoid, unless you absolutely can't help it. Is cashflow financing, and that is because it is only secured on your ability to pay and where the others may, sometimes when there's no money involved, ask for a personal guarantee of a reduced nature. There's very little risk because you're borrowing against a piece of machinery like a car. They've only you 60, 70% of the value.

You've gotta do something spectacular to lose 30% of the value when it's already a used vehicle. Or same with a piece of equipment or the invoicing where 20% of your clients can go bust and you still don't owe a penny. Cashflow financing. The second the business doesn't pay, they're coming after you for the money.

Unless we're using one of the regional growth lenders who will target jobs more than the business because they'll generally not ask for personal guarantee. 'cause they want to encourage entrepreneurs to grow. Try and avoid that one if you can. If you're B2C, there's a whole other raft with merchant cash advances.

Um, revenue based lending, again, they tend to be very expensive and more options of last resort. But the, the correct answer in all honesty, is it varies from deal to deal. You can have two businesses in the same sector with the same turnover, with the same net assets on the balance sheet, and the same net profit and different financing options available at the time. It can depend upon the contracts they've got.

So we've got one that we're doing right now where there are two companies in the engineering sector. One, almost. They're direct competitors and one, we can get 80% on the invoice financing. The other one, we can't get more than 20.

And the only difference is, is the credit control that the company currently has in place. So it does vary massively from each deal. The best thing is, is get the balance sheet, get the accounts, and then let's sit down either with myself or any other finance broker who you've got, who's experienced in m and e. And sit down with 'em.

And if they're not willing to sit down with you, it's because they don't know what they're doing. 'cause a lot of brokers, just like a lot of lawyers aren't used to no money down deals. And they'll tell you it can't be done. We literally were doing a deal for someone where we were looking to finance it, and they had their other broker on there who they've used previously with a lend, with a lender they were trying to do the deal with who wanted to stitch 'em up with a charge over their house.

They wanted a personal guarantee, they wanted money in. And I was then I said, well, why aren't you considering this, this, this? And he literally went in fantasy land. That may be true in the real world.

That's not how this is done. I don't know how long you've been doing this lad, but you need to get real. I was like, we need to talk. And literally pointed out and asked him how many times he'd got a lender to pay the money without the client sending the contract to buy the business.

We've done that twice for just under 2 million quids worth of lending in the last 12 months. That's where the lender released the money and allowed the client to buy the business, and the client hadn't finished signing the documents yet to hit a deadline. Anything is possible if you believe it, and that's the way you should go into every negotiation is with that mindset. Anything at all is possible as long as you believe it can happen.

Think about Roger Banister in the four minute mile. No one could break it for years and years and years he did it and it was something like, what? 400 people in the next 18 months ran a four minute mile? Nothing changed other than belief.

So fantastic question. Other questions you guys are experiencing? Anyone negotiating a deal right now that needs a bit of help? Thank you Martin.

, I was just wondering regarding deal structure and the deferred. I had a business owner who was concerned about, alright, I understand what you're talking about, but how do I ensure I get paid, say come year three, year five, and I've given you my business. I'm just wondering how you get round that. Fantastic.

Does everyone understand what the objection was? If for consideration, if I give you the business today, how do I make sure you're gonna pay me in year three, year four, year five? Now first things first, the more confident you are at the beginning. And the more you follow Jonathan's process, the less you'll actually get that question.

It is the absolute kicker in this business. The more confident you are, the more you practice, the more you get to the point where you're not intimidated, the less objections you get. I mean, the one we were doing yesterday with David, literally we went round. It took a bit longer than we thought.

'cause the guy was really chatty showing us everything, and he sat down at the end and he's like, so are you gonna buy my business? How many you quite like that as a negotiation strategies to start with. He's like, have we scared you off? Are you really interested?

Like, no, we're interested. We, we, we might even have a way to get you what you want, just not the way you want it. So coming back to that one, the way I usually answer it, if you get someone who you need to decide, is it an objection or is it a buying question, does everyone understand the difference between an objection and a buying question? Okay.

A buying question is simply where someone feels that they've not asked you something and they need to participate in the buying conversation because no, how many of you like to get sold to here? Okay. The people who put your hands up, you are the people who should have put your hand up. Earlier when I said, who likes sales?

Salespeople love getting sold to by other good salespeople because we're all addicted to it no matter what we say. Everyone else, how many of you like to buy things? Okay, but if the only difference between buying things and getting sold is are you feeling high pressure and are you engaged in the buying conversation? So when you get to that point, sometimes they've got no other question to ask, so they just make something up.

Now, the worst thing you can do if they ask something like that is going like Rocky and knock 'em out, bang. Because that's, you've just destroyed it. If it's an objection, you need to give him a little slap. So how do we do that?

I'll do the little slap first and I'll come back and show you the friendly way. 'cause the friendly way is actually the first part of the slap. So I go, that's an absolutely great question. First of all, let me tell you what my objective is with buying your business and what we're trying to achieve, and bring them into your vision of what you're trying to do.

And part of that is we're looking to buy somewhere between five and 12 businesses in your sector over the next five to seven years because small businesses have it hard right now because you're too small to be big, you're too big to be small, and you don't have the efficiencies and the scale to be able to compete with your bigger competitors. Whereas if we can buy 5, 10, 15 businesses that all work together in synergy, we can put the structures in and the efficiencies to make the business more profitable, to give it a future and help it compete aggressively as a small business against the bigger businesses.

Now, the only way I'm gonna do that is by everyone who we talk to in the future. You are telling them how amazing we were to deal with, how we looked after you, how we looked after your customers, how we looked after your staff, and how we looked after your legacy. If I screw you over in year three, are you gonna keep quiet about it? Are you gonna tell everyone on LinkedIn, on Facebook?

Every time you go down the pub and you've had a drink, you're gonna tell everyone, the barmaid, the cleaner, Dave from the pub who's got all the advice about what you should have done. True or false, you will tell the world. And you'll sue me. And I don't like paying legal fees.

The only way this is gonna work is if you have that ability that you can tell everyone how amazing we were. So first of all, there's no incentive for me to screw you over 'cause I losing every situation. And your lawyer will insist on protections in there that if we don't pay you, you get the business back. Now, as much as I like you David, I don't wanna pay you X and give you the business back in three years.

I'm buying your business 'cause I want it. I'm not buying it just 'cause I want to give you a million quid. Does that make sense? Now if they need a slap, that's how you handle the friendly cuddle.

If it's a genuine objection that they're hitting, I then tend to go in if they're still a bit resistant, a little bit heavier. And say, now what you are actually asking is in what situation would I not pay you? Is that a fair statement? Now what I'm doing is I'm getting their agreement to proceed along this line of questioning.

So he is gonna say, well, yes, and you go, great. Well, there's only two reasons that I, that this business will not succeed to the point that we can't pay you. The first one is that the economy terms against us. Because, let's be honest, despite promising us the most pro-business government since time began, I don't think they know the meaning of the word positive or pro-business.

They're not making life easy for us at the moment. Are they? Come on. Let's be honest guys.

Every single one of you in this room has got a business. It, it's tough at times, so. We don't know what the economy's gonna look like. That's the reason why actually, right now, if you've sold your business two years earlier, we probably could have give you more for it.

'cause the economy was doing better and the outlook was looking better. Right now we have to factor in a hostile government in how we've structure the deal. Now if it goes south, you have to ask yourself who's got more chance? 'cause if it's going south on me, it's going south on you.

Now you've got a really good track record with this business. You know it inside and out. You've probably been through a few recessions. You've been through COVID, you've been through the war in Ukraine.

We've both done that, and it comes down to support networks around you because how many of you've got businesses who know that businesses are lonely experience if you're not careful. Most business owners are isolated, so if something goes wrong, you'll struggle because you don't have the support network. I do. Let me tell you about my support network.

I actively engaged with 150 people who are out there buying businesses every single day, seasoned entrepreneurs who have seen every single situation. I'm also part of an inner circle of 53 people who do between half 1,000,000,003 quarters of a billion a year in acquisitions. In turnover, I can guarantee you if something goes wrong. And it's something I haven't seen.

Do you think one of those will have seen the exact problem before and be able to say, Martin, you're an idiot. Just do that. So if the economy turns against it, with all due respect, who do you think has got more chance of getting the business through? It profitably me with my businesses in that support network or you without any support network, which means the only way this is gonna go worse.

Is if there's something you've not told me about in the business already, now when we sign heads of terms, we're gonna go through due diligence, both financial, commercial, and legal. They will find anything that's out there. I don't wanna waste time. Neither do you.

There is nothing that right now we can't solve. If you tell me about it. But if they find about it, they will block the deal and stop me from doing it. So right now, is there anything at all that you know about the business that should concern me about buying this business?

Or are you completely happy this business is gonna succeed? They're gonna say, I'm completely happy. You go, fantastic. In which case, that won't be an issue.

Does that make sense? Now I ask him the question, the tie down. Does that make sense? Because he's agreed, he's happy with the solution.

And I say fantastic. So is there any other questions that's stopping you from going ahead with a deal or do we have a deal that's called the Pepsi or Coke option in negotiation? You can subconsciously plant the question, but look at the two options. The options were.

Do you have any other questions or are we signing the heads of terms? They have to consciously think, I don't want to do the deal. Now you're steering them forward and gaining momentum. Does that make sense?

, Yeah. Steve, , sort of a follow up to that, if you're buying sort of the majority shares in a company, so the vendors are, are, are returning a, a minority stake, maybe still working for the business? Maybe not. Yeah.

Their question also is, how do I know that I can get the value out of my minority shares at a later point if I wanna sell out? Because you control the business. Great question. So the first thing I would say to that is, first of all, wherever you can avoid it, do not buy majority shares.

You don't know the person, you don't know if you can get along with 'em, and nothing dissolves a business faster than directors arguing with each other. So first of all, I would say great question. The best way of guaranteeing you get the value is to just sell me a hundred percent today. If that's not what we're gonna do, then what will happen is we can agree in advance how.

In the shareholder agreement, which is different from the share purchase agreement, we will exit the business on a disagreement or if you wish to leave. And what will happen is we'll agree up front how your shares will be valued and how my shares will be valued. And if we get to a disagreement, either I'll buy you out of that agreed multiple, or you buy me out of that agreed multiple. And we agree in advance because the time to negotiate a divorce is when you're still in love.

Yeah, not when you're both fighting each other and trying to stab each other through the heart. Does everyone know that, by the way, that's not marriage advice. Let me be really clear about that. Cool.

Great question. When you've got a, , company director who's got a, , director's loan, , and he's taken more than he really should have done and actually still thinks he needs the money that he thinks he's entitled to for his business, how would you handle that? Great question. Does everyone know what a director's loan is?

So where you've taken out more from the business than you should have done and your, your accountant, there's a fancy little bit of a line that says that you owe the business money. So what Julie's asking is that person then thinks they need to take money outta the business, pay the tax on it, and then pay it back into the business to clear the director's loan. If you do that, depending on their tax bracket, you're gonna pay about 32 point a half to whatever, 45% tax doing that just to pay it back, I'd say that's an absolutely fantastic question.

Let me ask you, there's two ways we can do this. One that costs you more in tax and one that costs you less in tax, which would you prefer? Less. Well, the way we do this is when we give you your initial payment of half a million.

Say for example, your director's loan is a hundred thousand, you get 400,000 and you get a hundred thousand in a paper transaction where we give it to you and you instantly pay it back and instead of paying dividend tax, you'll just pay capital gains tax entrepreneurs relief, currently 14% and I'll save you 20% tax. And even better, I'll only keep 5% of the 20%. Sound fair. There's lots of ways of doing it.

So you're basically, it's a paper transaction their accountant and lawyer will do where you give them the money on paper and they instantly transfer it back. And all that happens is there's a tax liability for that payment that's much smaller than taking it as a dividend. Makes So before we wrap up, just to quickly reiterate the negotiation point of view, 'cause that was the big thing I wanted to cover today. 'cause it's been asked so much, you can either get it cheaper.

Get it on better terms or get more for your money. And if you can do all three, you're a wizard. Have a great day, everyone. I'll be round at lunch.

Take care.