While many sellers dream of M&A deals arriving fully formed, prepackaged, and ready for closing, the reality is that each transaction is more like a complex puzzle—one that often doesn’t completely come together until the wire transfers hit, and sometimes not until after integration.

The lower middle market operates under a unique set of dynamics compared to the middle and public markets. While large transactions often prioritize price, terms, closing certainty, and fit—in that order—the priorities in lower middle market transactions are distinctly different.

When it comes to M&A transactions, understanding seller goals is key for buyers who want to make a compelling bid. For M&A advisors like us, managing a deal involves balancing a lot of moving pieces—especially in an auction process where competition is high. We need to dive into the details while keeping an eye on the bigger picture: our clients’ strategic goals.

Before agreeing to an earnout as a seller, it’s important to understand the broader context of how they work and their potential pitfalls. Here are some key insights: