A put option we thought was protection turned out to be symmetric risk.

TL;DR: When we sold 80% of Traffic & Conversion Summit to Clarion, backed by Blackstone, we kept 20% and negotiated a put option to force a buyout after five years, so we'd never be stuck as a permanent minority partner in someone else's company. The buyer held a reciprocal call, priced at the exact same profit multiple as the original deal. Five years landed in 2023, on a two-year profit look-back that covered the pandemic. Profit was zero, so the multiple applied to it was also zero, and our entire 20% returned nothing.

A few weeks back I wrote about how the operating role Clarion promised us when they bought Traffic & Conversion Summit didn't survive the first year, even in writing. That was one lesson from that deal. This is a different one, and it cost us more.

Clarion approached us to buy the event, one we'd built and run for nine years. Their first offer was 90% for a little while, then we settled on 80%. We wish now we'd stuck with 90.

On the 20% we kept, we didn't want to sit as a permanent minority partner in a company we no longer controlled. So we negotiated a put option: the right to force Clarion to buy us out five years after close. It felt like real protection, a guaranteed floor under the piece of the business we hadn't cashed in yet.

What we didn't weigh carefully enough was the other half of that structure. Clarion got the mirror image, a reciprocal call, their right to force us out on the same terms whenever they chose. Both options were priced the same way: at the multiple from the original deal, applied to our share of that year's profits.

At the time, this read as fair. Same math, same terms, whichever side moved first. What it actually meant was that both sides were betting on the same single input, and only one side controlled that input after the deal closed.

Five years from our close landed in 2023, on a look-back covering two years of profit. Those two years happened to be 2021 and 2022, the years the pandemic gutted the live events business.

Clarion had already shut down roughly a third of the roughly 153 events in their portfolio during that stretch, events they'd paid hundreds of millions of dollars for. Ours wasn't spared. Profit for the look-back period was zero.

A multiple of anything, applied to zero, is zero. Blackstone's team saw it plainly: pick up a chunk of equity for free by simply exercising the options they already held, because the profit-based number the buyout was tied to had nowhere to go but nothing. They exercised. Our 20% returned nothing, and the event we'd spent nine years building was gone with it.

Here's what I'd tell anyone negotiating a structure like this now. A put option feels like protection because it gives you the power to force an outcome. What it doesn't do is give you any control over the number that outcome gets priced on.

We had the right to force a buyout. We never had any say over whether the profit metric that buyout was priced against would be a real number or a wiped-out one. Clarion, meanwhile, controlled exactly the decisions that determined that number, which events to keep running, which to shutter, during the two years that mattered most. The option looked symmetric on paper. In practice, one side held the lever and the other side held the paper.

This is the trap hiding inside almost any retained-interest structure priced off a metric the other party controls after close. It looks like alignment. It functions like exposure.

When we structure retained-interest terms with clients now, the first question we ask is not what multiple to use. It's who controls the input that multiple gets applied to, and during which window. If the answer is "the other party, for however many years the look-back covers," the term isn't protection yet, no matter how fair the math looks on the page.

The fix isn't to avoid retained equity in a deal. It's to price it off something that can't be zeroed by someone else's decisions during a window you don't control. Tie it to revenue instead of profit, where a bad two years still leaves a real number on the table. Set a fixed dollar floor underneath the formula, a number that holds regardless of what the metric does. Bring in an independent appraisal instead of a pure multiple-of-profit calculation. Or cap the look-back window tightly enough that one catastrophic stretch can't set the price for five years of work that came before it.

We didn't do any of that in 2018, because the structure looked symmetric and nobody was modeling a two-year global shutdown of live events. That's the part worth sitting with: you don't need to predict the pandemic to protect against this. You just need to ask, before you sign, who gets to decide what the number looks like when it matters most. If the honest answer is "not you," that's the term to renegotiate, not the term to accept because it feels fair on paper.

None of this would have stopped the pandemic. It would have stopped a single bad two-year window from being the entire determinant of whether our 20% was worth something or nothing.

If you're structuring something similar right now, get a clear read on where your own deal terms are exposed to an input someone else will control after the wire clears. The Exit-Ready Score walks through the same indicators, free, in a few minutes.

— Roland

Would you take three million today, or six million in two years?

Most people answer that question with math. Discount rate, time value of money, what else you'd do with the cash in the meantime.

The better question is who's actually deciding what you get in two years, and whether that number is still theirs to control by the time it comes due.

A bigger number later is only better than a smaller number now if nothing between here and there can zero it out.

Want the full answer?