Revenue sharing agreements as a New M&A Tool

1. Core Concept

RSAs can serve as a performance-based, revenue-linked payout mechanism in M&A. Unlike traditional earn-outs (illiquid, tied up in accounting disputes), RSA tokens can be sold in secondary markets after a holding period, giving sellers both ongoing revenue participation and liquidity flexibility.

2. Deal Structuring with RSAs

Step 1 – Acquisition Financing:
– Buyer pays part in cash, part in RSA.
– Example: $50M deal → $30M upfront + RSA entitling seller to 5% of gross revenues for 5 years.

Step 2 – Tokenization:
– RSA is converted into digital tokens on the CapitalTech platform.
– Seller initially receives RSA tokens.

Step 3 – Seller’s Holding Period:
– Seller holds RSA tokens during a negotiated period (e.g., 6–12 months).
– This ensures alignment with the buyer and stability post-deal.

Step 4 – Secondary Liquidity:
– After the holding period, seller can:
  1. Keep tokens for ongoing passive income
  2. Sell some or all tokens on CapitalTech’s secondary market to unlock immediate cash.
– Creates a flexible exit strategy that traditional earn-outs cannot provide.

3. Practical M&A Use Cases

1. Earn-Out Replacement with Liquidity – Seller earns RSA-linked payouts and gains the option to liquidate early if cash is preferred.
   2. Seller Rollover Alternative – Instead of retaining illiquid equity, seller receives tradable RSA tokens.
   3. Bridge to Full Exit – Seller can sell RSA tokens to investors once the holding period ends.

4. CapitalTech’s Role

– Structure: Draft M&A RSA templates with built-in seller liquidity provisions.
– Tokenize: Convert RSAs into digital tokens with defined holding periods.
– Distribute: Syndicate RSA tokens to investors.
– Comply: Ensure Reg D 506(c)/Reg S coverage for private sales.
– Facilitate: Operate a secondary liquidity venue for RSA tokens.

5. Advantages Over Traditional M&A Tools

Cash: Buyer burden high, seller exit immediate but limits buyer. RSA allows split cash + RSA.
Debt: Buyer adds leverage, seller sees no benefit. RSA is non-debt and shares upside.
Equity: Buyer dilution, seller tied up in illiquid stock. RSA avoids dilution and is tradable.
Earn-Out: Accounting disputes, seller locked in. RSA is revenue-based, transparent, and tradable.

6. Implementation Roadmap

1. Template – Standard RSA with holding + liquidity provisions.
   2. Pilot Deals – Target $10M–$100M mid-market transactions.
   3. Investor Network – Position RSA tokens as an alternative yield product.
   4. Liquidity Exchange – Provide sellers with structured secondary trading pathways.
   5. Institutional Outreach – PE firms, family offices, hedge funds, and trading desks as liquidity buyers.

7. Example Case

Acquirer: PE fund buys a logistics company for $100M.
Structure: $65M upfront + $35M RSA (6% of gross revenues for 5 years).
Seller’s Path:
– Year 1: Holds RSA tokens during stability period.
– Year 2: Receives 6% revenue share.
– Option: Sells 50% of RSA tokens for liquidity while keeping the rest.
Result: Buyer reduces upfront need, seller gets payouts + liquidity, investors access a new yield product.

Summary

By adding secondary liquidity for the seller, RSAs become a true hybrid between earn-outs and rollover equity—with more transparency, flexibility, and marketability. CapitalTech can pioneer RSAs as a new M&A settlement currency, enabling sellers to capture upside while also retaining liquidity optionality post-transaction.