Seller Financing for Vertical SaaS Independent Sponsors
Securities and M&A counsel for independent sponsors structuring vertical SaaS transactions, from LOI to close to the capital markets that open up afterward.
Seller Financing on vertical SaaS deals is one of those workstreams that looks routine on a checklist and decides outcomes in practice.
The typical vertical SaaS platform sits at $10M to $200M EV with EBITDA in the $2M to $30M (or run-rate ARR) range. The thesis runs on platform plus adjacent module acquisitions inside a single end-market. The ARR number on the CIM is rarely the ARR number on the closing balance sheet. Reconcile early.
How Seller Financing actually gets structured.
Anchor seller notes at 5 to 15 percent of EV, with a 4 to 6 year term.
Subordinate explicitly to senior and mezzanine debt with a clear standstill on default.
Price interest at 6 to 8 percent, with cash pay or PIK depending on the senior package.
Build prepayment optionality so refinancing flexibility is preserved.
In vertical SaaS, layer in ARR bridge built before LOI signing as part of the Seller Financing workstream.
Treating the seller note as a hand-shake. Sellers sue on notes more often than on equity disputes.
"A seller note is debt. Document it like debt. Service it like debt."Jason Powell · Seller Financing
The deal is one thing. The capital that opens up after close is another.
Most independent sponsors solve the closing capital and then run into the post-close capital problem alone. The capital markets relationships that matter at month 18 are part of this practice.
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An LOI on the desk, a vertical SaaS target, and a Seller Financing question worth a real conversation.
Twenty minutes of practitioner-grade input from a securities attorney whose first move is to read the deal, not the engagement letter.