What is a 60/40 deal structure?
A 60/40 deal structure splits the purchase price into two parts:
- 60% commercial debt (senior debt): a loan from a lender, secured on the business being bought, paid to the seller at settlement.
- 40% seller rollover: the seller keeps 40% of the business instead of taking that part of the price in cash. See seller rollover explained.
The third possible funding part, seller finance (a seller note repaid over time), is set to zero here. The buyer contributes no cash.
How does a 60/40 deal work?
Illustrative example
Illustrative only. Real terms depend on the business, the lender and the seller.
A business is bought for $1.5M.
| Funding part | Share | Amount | What the seller gets |
|---|---|---|---|
| Commercial debt | 60% | $900k | Cash at settlement |
| Seller finance | 0% | $0 | — |
| Seller rollover | 40% | $600k | A 40% stake they keep |
| Buyer’s cash | 0% | $0 | — |
After settlement, the buyer owns 60% and controls the business. The seller owns 40%, receives their share of dividends, and shares in any future sale.
Testing the repayments
Only the $900k loan has fixed repayments. Rollover has none. That keeps annual debt service lower than in structures with more debt.
Illustrative: if the $900k loan costs around $200k a year to repay, the business needs about $300k of reliable cash profit to hit a DSCR of 1.5x. DSCR is cash profit divided by annual repayments. See DSCR explained.
Why is there no personal guarantee in a 60/40 deal?
A personal guarantee makes you personally liable for the loan if the business can’t repay. In the 60/40 structure, the lender takes security over 100% of the business’s assets instead. Two features make that acceptable to a lender:
- Lower leverage. Only 60% of the price is borrowed.
- A seller with skin in the game. The person who built the business still owns 40%. They have every reason to make the handover work.
Each lender decides case by case, so this is a structure to negotiate, not a promise. See how to buy a business without a personal guarantee.
Why would a seller accept 60/40?
A seller in a 60/40 deal gets:
- Most of the cash they need now. 60% at settlement often clears the owner’s debts and funds the next stage of their life.
- A second payday. Their 40% stake is paid again if the business is sold later.
- Upside from your platform. If you combine their business with yours, cut duplicated costs and cross-sell, their 40% may be worth more than the $600k they rolled.
- Ongoing involvement. Some owners want to stay connected without the daily load.
In our experience, the sellers who choose 60/40 are confident in the business and in the buyer. They aren’t looking for the exit door. They are looking for a better-resourced partner.
When does the 60/40 structure fit best?
| Situation | 60/40 fit |
|---|---|
| Seller is mid-career and wants a partner, not an exit | Strong |
| Goodwill sits with the owner (clients loyal to them) | Strong: they stay invested through handover |
| You want to avoid a personal guarantee | Strong |
| Seller is retiring and wants a clean break | Weak: consider 70/20/10 |
| Seller wants no lender involved | Weak: consider 100% vendor finance |
How do you put a 60/40 deal together, step by step?
- Confirm the seller wants to stay invested. Ask about their plans for the next five years before you mention structure.
- Work out reliable cash profit. Strip out one-off items and the owner’s personal expenses to see what the business really earns.
- Size the loan. Check that 60% of the price can be repaid at a DSCR of around 1.5x.
- Speak to lenders early. Confirm they will lend on these terms with security over the business’s assets and no personal guarantee.
- Agree the shareholders’ terms in principle. Control, dividends and exit should be in the letter of intent, not left for later.
- Run due diligence and close. Verify the numbers, then settle and start the handover.
What does the lender look at in a 60/40 deal?
Without a personal guarantee, the lender relies on the business itself. Expect questions about:
- Cash profit and its stability over recent years, not just the latest one.
- Customer concentration: whether a few clients make up most of the revenue.
- The assets the lender will hold security over, such as equipment, receivables and contracts.
- The buyer’s track record running a similar business.
- The seller’s commitment: how long they will stay through the handover.
A strong answer on each makes a no-guarantee structure far easier to agree.
What are the risks of a 60/40 deal?
- A large minority partner. 40% is a meaningful stake. Disagreements about strategy or dividends are more likely than with a 10% stake.
- Exit complexity. Selling or restructuring later may need the seller’s agreement.
- Valuation disputes. If you want to buy the stake later, the price needs a clear formula.
A shareholders’ agreement covering control, dividends, drag-along and tag-along rights, buy-back terms and leaver terms handles most of this.
What kills 60/40 deals?
- Pitching it as "you only get 60%." The seller gets 60% now plus 40% of a bigger business.
- No clear plan for growth. If the seller can’t see how their stake grows, rollover looks like a loss.
- Leaving control vague. Agree what the buyer decides alone and what needs consent before the LOI.
How does 60/40 compare with the other structures?
60/40, 70/20/10 and 100% vendor finance all combine commercial debt, seller finance and seller rollover in different ratios. Read the full comparison in how to buy a business with no money down.
G&L M&A Advisory helps owners of $1M+ businesses structure deals like this, targeting a signed LOI within 90 days. See if you qualify for an acquisition strategy call.