Phasing deals

In the classic mental picture of an M&A transaction, the snapshot is always the same: a buyer acquires 100% of the company on a specific date, the documents are signed, the price is paid and the seller moves on. However, in the mid-market, in family-owned companies and in certain niches, another approach is becoming increasingly common: selling in stages, also referred to as a “phasing deal” or a staggered exit.

Put simply, a phasing deal involves not selling the entire company “in one go”, but structuring the transaction in several phases: an initial partial entry (as a percentage of equity or a business perimeter) and one or more subsequent stages in which, subject to certain conditions, the buyer acquires the remainder.

When well designed, this approach can be a very powerful tool to:

  • Maximise value for the seller
  • Reduce entry risk for the buyer
  • Align interests in transformation, professionalisation or family succession processes

When poorly designed, it can become a complex structure that generates conflict and is difficult to finance. The question, therefore, is not only whether a staged sale is possible, but when it is attractive and how to structure it properly.

1. What is a phasing deal?

There is no fixed legal definition, but in practice we talk about a phasing deal when two basic elements are present:

  • The buyer does not acquire 100% from the outset, but rather a meaningful stake or an initial business block.
  • The parties agree in advance mechanisms for the future transfer of the remainder (call and put options, deferred consideration, earn-outs, capital increases, etc.).

From there, the possible combinations are highly varied. Some typical examples:

  • A buyer acquires an initial majority (for example, 70% of the share capital) and the seller retains 30% with cross call/put options exercisable after three to five years, with a pre-agreed valuation formula.
  • A fund enters as a significant minority shareholder, with arrangements to reach a majority later if certain growth or profitability milestones are achieved.
  • The core business (the main activity) is sold first and the sale of a secondary line or certain non-strategic assets is deferred to a second phase.
  • An initial fixed price is agreed together with a variable component (earn-out) linked to future results, which in practice acts as a “deferred sale” of part of the value.

In all cases, the logic is the same: to decouple over time the full transfer of value and/or control, instead of concentrating everything on a single closing date.

2. When it may be attractive to sell a business in stages

Not every transaction lends itself to a staggered sale. In some processes, seller and buyer prefer a clean transaction with no future commitments. However, there are contexts in which a phasing deal is worth analysing in depth.

2.1. Businesses with unrealised uplift potential

Some companies have a solid base but a clear runway for professionalisation, product range expansion, geographic expansion, digitalisation or margin improvement. The seller is convinced the business is worth more than current figures suggest, but:

  • They do not want to shoulder the investment and effort of that transformation alone, or
  • They prefer to diversify risk and personal wealth before embarking on the next stage.

In those situations, selling in stages allows the seller to:

  • Crystallise part of the current value now
  • Bring in a partner (industrial or financial) that contributes resources and capabilities
  • Keep a second “exit window” to capture part of the future uplift, if the plan is executed successfully

2.2. Family succession and gradual shareholder retirement

In family businesses, the issue is not only financial; it is generational and emotional. The outgoing generation wants to organise its withdrawal without leaving the company “orphaned”, and the next generation or the management team needs time to consolidate.

A phasing deal can help to:

  • Structure a gradual exit for the founder or certain family members
  • Keep them for a period on the board or in transitional roles
  • Leave agreed a future full divestment (when the company is ready, or when the buyer wants to consolidate 100%)

This type of structure softens the impact and facilitates the transfer of key relationships, business knowledge and internal leadership.

2.3. Sectors with high uncertainty or regulatory change

In sectors exposed to regulatory, technological or demand shifts, it is common for buyer and seller to have very different views of the future. The seller believes the sector will re-rate; the buyer fears they may be “overpaying” at a delicate time.

A staged sale enables risk-sharing on the future. The buyer acquires a portion on reasonable terms and defers payment of another portion to the evolution of:

  • Results (revenue, EBITDA, gross margin)
  • Obtaining licences or authorisations
  • Specific milestones in the business plan

In this way, the seller does not give away all the upside, and the buyer does not pay all of it upfront.

2.4. Buyer financing constraints

In other cases, the industrial rationale exists, but the buyer cannot — or does not want to — finance 100% of the purchase immediately without placing excessive strain on its balance sheet.

A phasing deal allows the parties to:

  • Close a first phase compatible with the buyer’s current leverage capacity
  • Move to a second phase once the company has been integrated, synergies captured and cash generation strengthened

Here, deferred consideration, vendor loans and well-designed options play a particularly prominent role, balancing the seller’s return needs with the buyer’s financial prudence.

3. Main advantages for seller and buyer

Although each case has its nuances, some advantages recur.

For the seller, a staged sale can offer:

  • Immediate receipt of a meaningful portion of value, reducing wealth concentration and personal risk
  • The possibility of participating in future uplift if the project performs well in the new phase
  • A more orderly exit, especially useful in family contexts or generational transition

For the buyer, typical advantages include:

  • Reduced entry risk, by not paying from day one for expectations that have not yet materialised
  • Better alignment of incentives, keeping the entrepreneur or key team with “skin in the game” during critical integration and development years
  • Greater financial flexibility, by spreading the acquisition effort and associated debt over time

4. Risks and key watch-outs: it is not all upside

Phasing deals introduce complexity and, if poorly managed, can generate significant conflict.

Some critical points:

  • Corporate governance during the interim phase: board composition, drag/tag rights, reserved matters, dividend policy, key appointments… Everything must be properly built to avoid deadlock.
  • Potential conflicts of interest: a seller who remains a minority shareholder may have different incentives (for example, maximising their future exit price) compared with the industrial or financial logic of the new majority shareholder.
  • Future valuation formula: if the price for later stages is linked to EBITDA, market multiples or other metrics, margins, accounting adjustments, potential perimeter changes and the treatment of extraordinary items must be defined in detail.
  • Documentation and tax: the sequence of transfers, options and deferred payments can have material tax impacts for both the company and the shareholders. Better to anticipate them than discover them at filing time.
  • Medium-term relationship: sharing ownership, decisions and risk for several years requires more than a good contract. It requires a minimum level of trust, informational transparency and alignment on the main strategic vectors.

That is why the design of a phasing deal should not be a late “appendix” at the end of negotiations, but rather a central axis addressed from the outset with financial, legal and tax advisers.

5. The financial dimension: cash, debt and valuation

From a corporate finance perspective, a staged sale affects three pieces of the puzzle directly: the receipt timetable, the debt structure and the valuation logic.

In terms of cash proceeds for the seller, a phasing deal combines:

  • A meaningful initial receipt (initial price)
  • One or more future receipt windows (options, deferred payments, earn-outs)

Modelling how those cash flows fit into the entrepreneur’s personal wealth is essential: what portion of value is secured today, what portion depends on milestones over which they will have less control, and what time horizon makes sense personally and financially.

As to the buyer’s debt, staged structures often allow for more prudent initial leverage. The idea is that:

  • The first phase is financed with a reasonable mix of equity and debt
  • The second phase is supported, in part, by the company’s cash generation once integrated and optimised

From the perspective of banks and lenders, this can make the transaction more bankable than a highly leveraged “100% upfront”, provided the future payment timetable and option conditions are well defined.

Finally, from a valuation standpoint, a phasing deal forces a shift from a static snapshot to something more like a film: part of the value is set based on the current situation and another part is left open, subject to execution of the business plan. The clearer and more transparent this scheme is, the less room there will be for future misunderstandings.

6. When does a phasing deal make sense?

There is no single recipe, but it is often a reasonable alternative when several of the following elements coincide:

  • The business has clear uplift potential, linked to transformation, professionalisation or growth
  • The seller wants to crystallise part of the value but not fully give up the upside
  • The buyer seeks to cap the risk of paying today for future expectations
  • A 100% immediate deal would imply an undesirable level of debt
  • There is a minimum level of trust and willingness to coexist for a few years under an agreed framework

By contrast, it is probably not a good idea to propose a staged sale when:

  • The seller wants a quick, clean exit with no strings attached
  • Trust between the parties is low or virtually non-existent
  • The business has deep structural problems that nobody wants to share into the future
  • The size and complexity of the transaction do not justify the effort of structuring multiple phases

7. How Maraz Corporate Finance can help

Designing and executing a robust phasing deal requires fitting together strategic, financial, legal, tax and personal pieces. That is where an adviser specialised in corporate finance and M&A adds significant value.

Their role is not limited to “finding a buyer” or “agreeing a price”. Among other things, they can:

  • Help decide whether a staged sale genuinely makes sense for the business at that specific time
  • Build and compare different structuring scenarios (initial percentage, deferred consideration, earn-outs, options, receipt timetable)
  • Ensure the transaction is bankable and compatible with the buyer’s reasonable debt capacity
  • Support legal advisers in the design of shareholders’ agreements, corporate governance and future price clauses, and translate all of this into a narrative that is understandable for stakeholders: current shareholders, the board, the management team, lenders and potential buyers

At Maraz Corporate Finance, we support entrepreneurs, families and management teams considering a corporate transaction and asking themselves whether an immediate full sale truly suits them, or whether it makes more sense to structure a staged exit. We can help you to:

  • Analyse whether a phasing deal fits your situation, objectives and time horizon
  • Model the impact on valuation, cash and debt structure under different scenarios
  • Design, together with your legal and tax advisers, the most appropriate structure of options, deferred payments and governance mechanisms
  • Prepare a clear narrative for buyers and lenders that reduces uncertainty and facilitates closing

If you are thinking about selling your company and are weighing up “all or nothing”, the right question may not be only “what is it worth today?”, but also “how can I structure the sale to capture value, reduce risk and keep the right options open for the future?”. That is where a well-planned phasing deal can make the difference.

Javier de Rojas Roca de Togores

Partner - Maraz Corporate Finance