Corporate groups remain active buyers of the right practices — larger, associate-led, growing, with a clean contract behind them. Their offers usually lead with a multiple of EBITDA and a number big enough to end the conversation there. The heads of terms then set out how that number is actually paid, and it is in those clauses rather than the headline that most of the value moves.
Heads of terms are almost always expressed as non-binding on price. They are commercially binding in every way that matters. Once they are signed you are negotiating against your own document, with a buyer who has exclusivity and no reason to improve on what you already agreed. Everything below is cheap to change before signature and expensive afterwards.
Every corporate offer breaks into three components, and only the first is money:
Ask for that split as a percentage before you discuss the multiple at all. An offer of five times EBITDA with 85% at completion is a different proposition from six times with 50% at completion, and the second one usually sounds better in the room.
The figures below are illustrative, but the structure is the ordinary one. Take a practice with adjusted EBITDA of £360,000 and an offer at five times, so a headline of £1,800,000 for the shares of the trading company. The heads of terms propose:
Now put the tax on it. Assume the shares qualify for Business Asset Disposal Relief and the base cost is negligible, so the whole proceeds are gain. BADR is charged at 18% for disposals on or after 6 April 2026, up to a £1 million lifetime limit; gains above that limit are charged at 24% for a higher-rate taxpayer. The annual exempt amount is £3,000.
Compare it with a competing all-cash offer of £1,550,000 at completion. Tax there is £180,000 on the first million plus £131,300 on the balance, so about £311,300, leaving £1,238,700 in the bank on the day. The £1.8m deal nets £1,428,700 — but only if all three earn-out instalments pay in full, five years later, on a practice someone else is running. If two of the three instalments miss, the higher offer has paid you less.
This is the part of a corporate deal that catches sellers hardest, and it is settled law rather than a matter of interpretation. Where the earn-out is unascertainable at completion — a share of future profits, an amount that depends on performance — the right to receive it is itself a chargeable asset in its own right, following Marren v Ingles. Its market value at completion is added to your disposal proceeds and taxed then. When the instalments later arrive, that is a second, separate disposal of the right you were already taxed on.
In the example above, if the earn-out right is valued at completion at, say, £540,000 rather than its £720,000 face value, your year-one gain is £1,620,000 rather than £1,080,000 — and the tax bill falls due on the 31 January following the end of the tax year of completion, out of the completion cash. That is manageable at 60% up front. At 30% up front it is a real cash-flow problem.
If the earn-out then underpays, the shortfall is a capital loss on the disposal of that right, and sections 279A to 279D of the Taxation of Chargeable Gains Act 1992 allow an election to carry that loss back against the original disposal. It is a genuine remedy, but it is an election with conditions and deadlines, not an automatic correction. Where the deferred consideration is instead ascertainable — a fixed £240,000 on a fixed date — it is taxed in full at completion whether or not it ever arrives, with relief under section 48 only if it becomes irrecoverable.
Corporates often prefer to buy the trade and goodwill rather than the company, because it leaves the history behind. For a seller whose practice is incorporated, that preference is expensive. On an asset sale the company receives the proceeds and pays corporation tax on the gain at up to 25%, and you are then taxed again on extracting the cash. BADR is a personal relief on your disposal of shares — it does nothing for a sale made by your company.
A share sale keeps the whole gain in your hands at 18% and 24%. The buyer will price the risk they are taking on by buying the history, usually through warranties, indemnities and a larger retention, and that is the right trade to negotiate. Getting this wrong is a six-figure error on a deal of this size, which is why the structure question belongs at heads of terms and not at the drafting stage. Our two-year exit plan covers the preparation that makes a share sale saleable in the first place.
The 18% rate is not automatic. For a share disposal you generally need, throughout the two years ending with the disposal: at least 5% of the ordinary share capital and voting rights, entitlement to at least 5% of distributable profits and of assets on a winding up, the company to be a trading company, and you to be an officer or employee of it. The £1 million limit is a lifetime one across all claims — if you sold a previous practice and claimed then, only the unused balance is available now.
Two things worth doing early: confirm that any alphabet share classes or spousal shareholdings actually meet the 5% economic tests, and check whether large cash balances or investment property sitting in the company put its trading status at risk. Both are fixable with notice and neither is fixable in the week before completion.
Sellers fixate on the headline; buyers concede the headline and win the mechanics. A slightly lower price paid mostly on completion routinely beats a bigger number strung across five contingent years. Model the after-tax, risk-adjusted version of every offer before you sign anything — that is the analysis we run for selling clients, alongside how the practice is valued in the first place and, for NHS practices, the delivery history a buyer will price.
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The price and commercial terms are normally expressed as non-binding, while the exclusivity, confidentiality and costs clauses usually are binding. That distinction matters much less than it sounds. Once heads are signed you have given the buyer a period of exclusivity, you have stopped talking to other bidders, and every later negotiation starts from the document you already agreed. In practice the shape of the deal — the split between completion cash and earn-out, the length of the tie-in, whether it is a share or asset sale — is settled at heads and rarely improves afterwards. Take advice on the structure before you sign, not after.
Usually yes, at least in part. Where the earn-out is unascertainable at completion, the right to receive it is treated as an asset in its own right, following Marren v Ingles. Its market value at completion is added to your proceeds and taxed in the year of sale, with later receipts treated as a separate disposal of that right. Ascertainable deferred consideration — a fixed sum on a fixed date — is taxed in full at completion whether or not it ever arrives. Either way the bill is due by the 31 January following the tax year of completion, so the completion cash has to be large enough to cover tax on money still outstanding.
For disposals on or after 6 April 2026, Business Asset Disposal Relief charges 18% on qualifying gains up to a £1 million lifetime limit. Gains above that limit are charged at 24% for a higher-rate taxpayer, and the annual exempt amount is £3,000. BADR was 14% for 2025/26 and 10% before 6 April 2025, so the relief is worth materially less than it was to sellers a few years ago. Qualifying for it is not automatic: for a share sale you generally need at least 5% of the ordinary share capital, voting rights and economic entitlements, and to have been an officer or employee, throughout the two years to disposal.
For a seller, a share sale is almost always better. The gain arises personally, so Business Asset Disposal Relief can apply at 18% on the first £1 million and 24% above it. On an asset sale the company receives the proceeds and pays corporation tax at up to 25% on the gain, and you are taxed a second time when you extract the cash — BADR does nothing for a disposal made by your company. Buyers often prefer assets because it leaves the company's history behind, so expect them to price that risk through warranties, indemnities and a larger retention. Negotiating those is cheaper than paying two layers of tax.
There is no fixed rule, but the split is the single most useful question to ask before discussing multiples. Compare offers on completion cash after tax rather than on headline price. On an £1,800,000 offer at 60% up front, the completion cash is £1,080,000 and the capital gains tax on the whole structure is roughly £371,300, so the money in hand comfortably covers the bill. At 30% up front it would not. A lower headline paid mostly on completion frequently beats a higher one strung across contingent years, particularly where the earn-out depends on decisions the buyer will be making.
They can, and not always deliberately. Once the buyer owns the practice they set staffing, pricing, the lab, the appointment book and any management charges recharged from their group, and each of those can move EBITDA below the earn-out threshold. Protect against it in the heads of terms: define exactly how EBITDA is calculated and which group recharges are permitted, obtain a covenant to run the business in the ordinary course, and require the target to be recalculated if that covenant is breached. Also split the earn-out so that a good-leaver exit, illness or injury does not forfeit money you have already earned.
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