The headline held. The structure took 18%.

This deal closed. The headline number was the number the founder had been quoted at the start: $42M, at 9.5x profit, from a strategic buyer. On paper, a clean win.

Read the paper more closely, though, and 18% of that number was not really paid at close. It was parked in a two-year earnout, tied to net revenue retention, or NRR: whether the customers the founder had at closing kept spending, and spending more, over the next two years.

If retention hits its target, the founder gets the full number. If it misses, the founder loses $7.6M of the stated enterprise value. That is not a rounding error. That is a large slice of the deal, sitting on the outcome of two years the founder no longer fully controls, because someone else now owns the company.

This is the trap in the word "closed." Deals close on the headline number. Founders walk away with the structure. The headline is what gets announced. The structure is what gets paid, and when, and only if.

The founder here did nothing wrong operationally. This is a normal move by a strategic buyer in vertical software. Retention is the whole risk in a subscription business, so the buyer guards against it by tying part of the price to it. The band the deal was sized to is the published lower-middle-market range in GF Data's H1 2025 report. The structure was standard. That is exactly why it is worth understanding: standard structures quietly move real money out of the headline and onto conditions.

The lesson is not "refuse earnouts." Sometimes an earnout is how you get a strong headline at all. The lesson is to read the offer for what it actually is. What gets paid at close. What gets paid only if targets are met. And under what terms, on whose control, over how long. The headline number is not your number until you know how much of it is real cash and how much is a bet on the future.