Earn-Outs in Fire Safety Deals: How They Work and When They Bite

The PurposeAn earn-out is the buyer insuring the one risk it cannot check

Everything material about a fire safety business can be verified in diligence except one thing: whether the contract base stays once the owner has gone. Certificates can be inspected, accounts can be audited, engineer qualifications can be confirmed. Client loyalty after a change of ownership cannot, and that is precisely what most of the price is being paid for.

So the buyer defers part of the consideration and attaches it to a measure of that risk. In this sector the measure is usually retention of contracted income at twelve or twenty-four months, sometimes adjusted EBITDA over the same period, and the seller receives the balance if the condition is met. Read plainly, it is the buyer saying it will pay the full price for a business that behaves after completion the way it behaved before.

That is a reasonable position, and the consolidation now running through the sector is why it is so standard. Groups building national platforms are acquiring steadily, from the Inflexion investment in Ranger Fire and Security announced in June 2026 to Axis CLC's acquisition of Fieldway Group from Foresight on 23 June 2026, and buyers making repeated acquisitions apply the same structure each time because it has worked for them.

Everything material can be verified in diligence except whether the contract base stays once the owner has gone. The earn-out exists for that one question.

The TermsThe measure, the control and the definitions decide whether it pays

Look at the measure first. A retention test based on contracted income is usually better for a seller than one based on profit, because retention is closer to something you can still influence during a handover, while profit after completion is affected by decisions the buyer now makes. If profit is the measure, the agreement itself has to say how that profit is calculated. Otherwise the figure deciding your money is prepared by the people who benefit from it coming out low.

Look at control second. During an earn-out period the business is owned and directed by somebody else, and the outcome can be affected by their choices: central costs allocated in, pricing changed, engineers moved onto other work, a decision not to pursue a renewal. Sellers routinely negotiate protections here, covering how the business is run during the period and what may and may not be charged to it.

Look at the definitions third, because this is where earn-outs are won and lost. Settle in advance whether a contract still counts as retained when it renews on different terms, when it renews for five sites out of seven, and when a group buys the client and consolidates its suppliers. A measure that is precise is a measure you can plan against. A vague one becomes an argument at exactly the moment your bargaining position has gone.

The period is the fourth thing to weigh, because length changes the nature of the test more than owners assume. A twelve month measure is largely about whether clients stay through a change of ownership, which is the risk the buyer set out to cover. A thirty-six month measure starts to record how well somebody else runs the business, which is a different question entirely and not one a departed seller can do much about.

The PositionJudge the deal by what is certain, not by the headline

The useful discipline is to look at any offer twice: once at the headline figure, and once at the amount payable at completion regardless of what happens afterwards. That second number is what you are certain of. An offer with a high headline and half of it conditional over three years may be worth less to you than a lower offer paid at completion, and only you can weigh that, because it depends on what you intend to do next.

Preparation changes the shape of this more than negotiation does. The stronger the evidence that the contract base is institutional rather than personal, documented agreements, renewal history, clients who deal with more than one person, the less a buyer needs to defer, and the more of the price arrives on the day. Owners who did that work two years earlier usually see it in the structure rather than only in the multiple.

There is also a tax dimension, and it deserves proper advice rather than a paragraph. Business Asset Disposal Relief has been 18% since 6 April 2026 against a 24% main rate, and the treatment of deferred and contingent consideration is not always straightforward, particularly where the right to future payments is itself treated as an asset. Take that question to your own adviser before terms are agreed, not afterwards.

It is worth asking who will be doing the measuring, too. The calculation is normally prepared by the buyer's finance team, from systems the buyer now controls, so the agreement should say what records you are entitled to see, in what form, by when, and how a disagreement about the figure gets settled. An expert determination clause costs nothing to include and is the only practical remedy if the number comes back wrong.