How much of an FM sale price is typically deferred?

It varies widely with the business and the buyer, and there is no standard proportion worth quoting. What is consistent is the reason: the deferred element is sized against renewal risk, so shorter contract terms and heavier client concentration push it up, and long contracts with a stable retention record push it down.

Can I insist on being paid in full at completion?

You can ask, and some acquirers will trade a lower headline price for a clean settlement on the day. That trade is worth taking seriously rather than dismissing, particularly if the measurement period would depend on renewals you cannot influence. Certainty has a value and it is reasonable to pay for it.

Why do FM earn-outs go unpaid?

Usually because the target was an earnings figure the seller stopped controlling at completion, with central recharges and overhead allocations left undefined in the agreement. Targets built on a named list of contracts and their renewal dates fail far less often, because there is very little left to argue about.

Should I stay involved during the earn-out period?

If the target depends on client relationships, yes, and it is worth negotiating explicitly rather than assuming. A defined role, with access to clients and some visibility of the numbers the target is measured against, turns the deferred payment into something you can affect. Without it you are carrying a risk while somebody else holds every lever that moves it, which is not a position any seller should accept without repricing it.

Earn-Outs in FM Deals: How the Second Payment Is Earned

The RiskThe deferred payment is priced against renewal, not performance

A buyer paying for an FM business is paying for a contract book whose contracts have to survive a change of ownership and then be renewed by clients who did not choose the new owner. That is the risk the second payment is holding back against, and it is why deferred consideration is more common in this sector than in trades where the customer relationship is transactional.

Public sector exposure is currently the clearest illustration of why buyers think this way. On 18 June 2026 the Cabinet Office set out an ambition to end what it called outsourcing by default, introducing a public interest test before central government contracts above £1m are renewed and signalling that building management services, including cleaning and security, would return in-house as contracts end from 2028. Whatever one thinks of the policy, it is precisely the kind of development that makes a buyer want a portion of the price attached to contracts still being there in two years.

So the question to ask at heads of terms is not whether there is an earn-out. It is what the earn-out is measuring, and whether that measure is something your business can still influence once you no longer own it.

The TargetThe three ways the target is usually set

Retained contract value at an anniversary is the most common in facilities management, and the fairest of the three when it is drafted properly. A defined list of contracts, a value attached to each, and a measurement date twelve or twenty-four months after completion. It is objective, and the argument it produces is about which contracts count rather than about accounting.

EBITDA over a defined period is the second, and it is where owners get caught. Earnings after completion depend on costs the buyer now controls: central overhead recharges, changed insurance arrangements, a new payroll system, a head office allocation that did not exist before. If the target is an earnings measure, the agreement has to say exactly how those items are treated, and that is the clause worth paying a solicitor properly to negotiate.

A renewal rate gate is the third: a percentage of contract value renewed, sometimes as a cliff and sometimes on a sliding scale. A sliding scale is almost always better for a seller than a cliff, because a cliff turns one lost contract into the loss of an entire payment.

Whichever of the three is used, ask for the measurement to be defined in the agreement with a worked example attached. A worked example takes an afternoon to prepare and removes most of the disputes that arise eighteen months later, when both sides are reading the same clause differently.

The ConditionsThe three conditions that decide whether the second payment lands

Contract term remaining at completion is the first and largest factor. If the contracts being measured have three years to run, the earn-out is close to mechanical. If several fall due for renewal within the measurement period, you are being asked to guarantee an outcome that depends on tender decisions you will not be in the room for, and the answer is either a longer term negotiated before the sale or a different measure.

What you are allowed to do during the measurement period is the second. An earn-out tied to client retention while you are kept away from the clients is not a target, it is a lottery. If a deferred element is being proposed, a defined role for the period it is measured over is a reasonable thing to ask for, and most buyers expect the request.

The drafting is the third. Ask for an undertaking that the buyer will not take steps that make the target unreachable, a stated position on what happens if the group sells the business on mid-period, and a way of settling a dispute about the measurement that does not start with solicitors.

The broader point is the one worth ending on. A well-structured earn-out on a business with long contracts and stable client relationships is usually paid, because the conditions that make it achievable are the same conditions that made the business attractive. Preparation is what produces both.

An earn-out tied to client retention while you are kept away from the clients is not a target, it is a lottery.

Before Heads of Terms

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