It’s one of the most common messages I get from founders:
“We’ve had someone offer to buy us.”
On the surface, it’s a great position to be in. Most founders don’t get approached. And when they do, it often feels like a validation moment – a reward for years of hard work, risk, and graft.
But here’s the uncomfortable truth:
A lot of deals done create poor outcomes.
Not because founders make bad decisions, but because they sleepwalk into bad terms, and convince themselves that the details don’t matter until later. They do. The detail is the deal.
This was the core theme of my keynote at the Agency Hackers Growth Summit: The Anatomy of a Bad Deal – and how to avoid one.
Why founders get caught out: the obsession with the headline number
Most sellers become focused on headline numbers.
It’s natural. A buyer puts a number on the table and it becomes the anchor. The conversation becomes about valuation multiples, “market comps”, and what someone else sold for.
But the founders who do best in exits focus on something else entirely:
- How much cash is paid on day one
- What’s deferred and what conditions it’s tied to
- Whether the earn-out is genuinely achievable
- Whether they have control over the levers that drive performance
- What happens if priorities change post-acquisition
- What their rollover equity is actually worth
- And whether they can exit again in the future
Or put more bluntly:
Never, ever separate price and terms.
The problem with “earn-outs don’t work”
One of the most common myths I hear is that earn-outs are inherently bad.
They’re not.
Badly designed earn-outs are bad.
A well-structured deal can be a genuinely fair alignment between buyer and seller – and it can create meaningful upside for founders and teams.
But too many earn-outs are written in a way that gives the seller responsibility without control.
And that’s where “bad deals” are born.
Two real-world examples of what “bad” looks like
In the talk, I shared a couple of real-life structures that are unfortunately common.
Example 1: “The buyer sets the price – and lowballs”
A buyer anchors valuation low (often because the owner is tired, the business is early-stage, or the founder is sold on the promise of “support”). Then the structure does the real damage:
- Buyer buys 10% at a low valuation
- Receives additional equity through gifting/discounting
- Gains more equity through options on exit
- And ends up with a disproportionate share of the upside
The founder believes they’ve “partnered” for growth, but the buyer ends up capturing the value, often while being paid along the way.
Example 2: “Paper value” with no control
Another common trap is the heavy use of group equity (“rollover”) to make the deal look attractive.
The pitch sounds like:
“We’ll pay you mostly in equity – and when we exit, you’ll do incredibly well.”
But if the seller has no control, no protections, and no visibility on how that equity behaves over time, the value can erode quickly.
In the deck, the failure points are clear:
- Seller has zero control
- Buyer dilutes equity over time
- The seller is left holding “paper value” that may never become liquid in a meaningful way
The only money you are guaranteed is what you receive on day one
This line tends to land hard, because it’s true.
Everything after completion is conditional:
- Performance
- Integration
- Priorities
- Leadership changes
- Group recharges
- Client movement
- Market shifts
So whilst the headline number matters, the cash on day one matters more.
And it’s why I always say: pay lawyers well.
Not to be aggressive, but to be protected.
What “good” looks like in a healthy agency deal
There are many ways to structure a deal well. But the healthiest structures tend to share a few consistent traits:
- Fair value based on size and KPIs
- Typically 50–70% paid up front
- The remainder deferred or earn-out based
- If earn-out, the multiple is applied at the end (not quietly eroded through mechanics)
- If equity is involved, control and protections are applied
- Clear leaver provisions, with sensible “good leaver” treatment
This isn’t about “winning” negotiations. It’s about ensuring the deal reflects reality: risk is shared fairly, and upside is genuinely achievable.
Minimum protections if you’re taking rollover equity
If you take equity as part of the deal, you’re no longer just a seller, you’re an investor.
So you need investor-grade protections.
At a minimum, the deck outlines terms founders should push for, including:
- Tag-along / drag-along rights (with sensible thresholds)
- Liquidity horizon and longstops (so your equity doesn’t become indefinitely illiquid)
- Anti-dilution protection (to prevent death by a thousand funding rounds)
- Pari passu rights in rollovers (so you’re not structurally subordinated)
These are not “nice to haves”. They’re basic safeguards that stop value leaking out of your hands.
Understand the buyer type – because it changes everything
One of the simplest ways to avoid a bad deal is to understand who is buying you and why.
Broadly, most agency acquirers fall into three buckets:
- Strategics (other agencies, consultancies, platforms)
- PE-backed roll-ups (groups already PE-backed, buying bolt-ons)
- PE platform plays (private equity building a new group)
Each type has different motivations, different deal mechanics, and different expectations.
And crucially: they pay differently.
A strategic buyer might pay more for immediate capability and cross-sell value. A roll-up might optimise for arbitrage. A PE platform might focus on scalability, governance, and a clear path to exit.
If you don’t understand which game you’re in, you can’t negotiate properly.
Earn-out non-negotiables (the detail that saves deals)
If you’re signing an earn-out, there are a handful of clauses that should be considered non-negotiable.
In the deck, I called out areas such as:
- Baseline targets and growth assumptions agreed by both sides
- No unapproved group charges
- Maintain “business as usual” inputs (hiring, marketing, sales, pricing support)
- Protection against client reallocation
- Good leaver protection (if removed without cause)
- Clear definitions for every metric (revenue, GP, EBITDA, normalisation, adjustments)
This is where founders get hurt most often – not in the multiple, but in the definitions.
Slides: The Anatomy of a Bad Deal (Agency Hackers Growth Summit)
You can view the slides from the keynote below:
Free download: The Exit Blueprint
If you’re an agency founder and any of the above feels uncomfortably familiar, I wrote a practical guide that goes deeper on:
- How valuation really works
- How deal structures create (or destroy) outcomes
- What buyers look for
- How to prepare properly, before you’re under pressure
You can download it free here
