Payment structure types — the five poles + hybrids.

Payment-structure design is the deal-architecture work where economic foundations translate into specific dollar allocations. Five canonical structures cover the design space; real deals usually blend multiple structures to fit the specific economics. The discipline is to use each structure for what it does best and avoid the over-engineered combinations that create operational friction without proportional benefit.

Seller certainty, buyer leverage.

All-cash structure pays the entire purchase price in cash at close. Maximum seller certainty (no post-close performance risk, no concentration of pricing in deferred mechanisms); maximum buyer commitment of upfront capital.

When all-cash fits:

• The buyer's capital structure supports full cash payment without operational stress.
• The deal's value-creation thesis is structural (multiple arbitrage, strategic positioning) rather than synergy-execution dependent.
• The seller's preference is exit-and-done with no continuing involvement.
• Competitive deal dynamics where all-cash gives the buyer a structural advantage over deals with deferred mechanisms.

Bridging valuation gap, reducing DSCR pressure.

The seller-note is the most underutilized payment structure in agency M&A. Used well, it bridges valuation gaps that would otherwise break the deal — and reduces the senior-debt-service pressure that constrains buyer-side cash-at-close.

Seller-note structure has the seller financing a portion of the price through an installment note that the buyer pays over time.

Performance risk, incentive alignment.

Earnout structure conditions a portion of the price on post-close performance — typically 10–25% of headline price tied to retention, EBITDA, or named-account outcomes over 12–36 months.

Earnouts work best when:

• The post-close performance carries genuine uncertainty the buyer wants to shift to the seller.
• The seller has meaningful influence over the performance metrics (otherwise the structure is friction without leverage).
• The performance metric is objectively measurable (revenue retention by named account; EBITDA at a defined baseline; specific producer retention).
• The buyer's investment committee requires the structural protection.

Earnouts create operational friction throughout the earnout window — disputes about whether the buyer is operating the business in good faith, audit-rights conversations, calculation methodology arguments. Use sparingly; not as a substitute for proper diligence.

Long-term alignment, PE-pattern.

Rollover equity structure has the seller retaining an equity position in the combined entity — typically 5–25% — that's converted into the buyer's enterprise equity. Most common in PE-backed deals where the rollover aligns seller interest with the buyer's exit thesis.

Mechanical features:

• The seller's retained equity converts to common or preferred shares in the buyer entity.
• The seller participates in the buyer's enterprise value growth.
• Drag-along and tag-along provisions govern future exit transactions.
• The seller's economic outcome depends on the buyer's exit pricing and timing.

Rollover equity has tax-treatment advantages — gain on the rolled-over equity is typically deferred until the buyer's exit, which can be tax-efficient for the seller. The buyer benefits from continued seller involvement and the alignment of incentives.

Working capital, earnout-adjacent.

Deferred-payment structure addresses specific deal mechanics that don't fit cleanly into seller-note or earnout categories.

• Working-capital deferrals. Post-close adjustments based on closing-date working capital — paid (or refunded) typically within 60–120 days of close.
• Conditional payments. Payment contingent on specific events (regulatory approval, carrier consent, specific account retention) that don't fit standard earnout structures.
• Hold-back releases. Specific portions of price held in escrow against specific risks — concentration, regulatory, tax — released on schedule.

Most real deals.

Most real agency-deal payment structures are hybrids. A typical mid-market structure:

• 70% cash at close, funded by senior debt + buyer equity.
• 20% seller-note, 5-year amortization, 7% interest.
• 10% earnout against top-12 account retention over 24 months.

The hybrid math is where the deal-design discipline shows. Each pole serves a purpose; the proportions reflect the specific deal economics. The disciplined buyer uses each structure deliberately and doesn't add complexity that doesn't serve a specific purpose.

The payment-structure-types layer pairs with the economic-foundations layer (the grounding) and the seller-financing sub-cluster (the deep-dive on seller-note mechanics). The Pillar — Payment Structures — covers the broader framework.