Successful founders prioritize cash upfront over potentially larger payouts from complex earnouts. Earnouts often underperform because founders lose control of the business's future performance, leading to dissatisfaction despite a higher on-paper valuation.

Serial acquirer Lifco improves post-acquisition performance by having sellers retain an ownership stake in their business. This goes beyond typical earn-outs, keeping the founder's expertise and incentives aligned with the parent company for long-term growth, rather than just hitting short-term targets.

Veteran dealmaker Andy Cohen argues against a "win-at-all-costs" mentality in M&A. True success, particularly in tech deals where talent is key, comes from ensuring the acquired team feels the outcome is fair and their future is promising. If one side feels they lost, the integrated entity will fail.

Alex Bouaziz's core M&A principle, learned from his father, is to optimize for long-term satisfaction over short-term leverage. Even when holding the upper hand in negotiations, he structures deals to be fair for both sides. The goal is for both the acquirer and the acquired founder to look back in five years and feel the deal was a great outcome, ensuring better integration and alignment.

Founders should be wary of earn-out clauses. Acquirers can impose layers of pointless processes and overhead costs, tanking the profitability of a successful business and making it impossible for the founder to ever receive their earn-out payment.

Successful large-scale acquirers remain nimble, flexing their own processes to suit the acquired company rather than force-fitting it into a rigid corporate structure. This preserves the culture and talent that made the company valuable, preventing value destruction and keeping the new team engaged.

Earnouts rewarding only the acquired team's siloed performance create a major integration roadblock. This structure incentivizes them to hoard resources and avoid collaboration, directly undermining the goal of creating a unified culture and destroying potential cross-functional value.

Due diligence cannot quantify a team's crucial soft skills. When an acquirer forces change aggressively post-close, they risk an exodus of these skills and key talent, maximizing the chance of the investment failing. A partnership approach that preserves talent for at least the first year is a much safer strategy.

Go beyond standard performance-based earn-outs by structuring payments with 'kickers' that reward sellers for specific de-risking actions. For example, if there's high customer concentration, offer an additional payment for diversifying revenue away from the main client, aligning them with the buyer's risk mitigation goals.