Seller Net Exit Proceeds Estimator

Understanding Net Exit Proceeds: EV vs. Equity Value

In M&A negotiations, buyers quote an **Enterprise Value (EV)**. However, what you actually take home depends on your balance sheet at closing. Most private transactions are executed on a cash-free, debt-free basis. This means the seller must pay off all outstanding bank loans, lines of credit, and debt-like liabilities, while keeping the operating cash.

The resulting figure is your **Equity Value**:

Transaction Structure Friction: Stock vs. Asset Deals

The legal structure of your transaction has massive tax implications.

• Stock Sale: The buyer purchases the shares of your corporation. Sellers pay capital gains tax rates on the equity proceeds. This is generally the most tax-efficient structure for business sellers.
• Asset Sale: The buyer purchases specific assets and liabilities. Sellers face double-taxation risks: the corporation pays tax on the asset sale gains (with portions taxed as high ordinary income rates due to depreciation recapture), and the individual owners pay capital gains tax when the remaining cash is liquidated.

Buyers strongly prefer asset sales because they can step up the tax basis of the acquired assets to fair market value and claim high depreciation deductions. Sellers should seek a valuation premium if forced into an asset structure.

Managing Transaction Costs and Advisory Payouts

Beyond taxes, advisory transaction costs are another major friction point. In typical lower-middle market transactions, M&A brokers, investment bankers, CPAs, and legal counsels charge success fees. Bankers typically charge a percentage of enterprise or equity value (ranging from 3% to 6%), while legal and accounting costs are billed hourly. Having a clear visualization of these outflows ensures no surprises at the closing table.