Deal Structure
Deal Waterfall
Also known as: Purchase price waterfall, closing waterfall
The step-by-step breakdown of how a headline purchase price shrinks to the amount that actually hits your bank account — through deductions, escrow, fees, adjustments, and holdbacks.
WHY IT MATTERS
Every founder hears a number — "We'll buy your company for $28 million" — and starts spending it in their head. The deal waterfall is why that number is wrong. Between the headline price and the wire transfer, a series of deductions stack up: escrow holdbacks, working capital adjustments, transaction fees, earnout deferrals, seller notes, and indemnification reserves. Each one is negotiated separately, and each one reduces what you actually receive at closing. The waterfall matters because most founders have never seen one before the first LOI lands. By then, the structure is already set and the leverage has shifted to the buyer. Founders who understand the waterfall before they go to market can negotiate each layer independently — and avoid the shock of watching a $28 million headline shrink to something closer to $16 million in real cash on closing day.