You just got an offer to buy your business for $20 million! That's wonderful. Don't go buy a $20 million yacht until you read this.
Let's clarify how transactions work. Buyers will pay a market price for a business based on its earnings, assets, prospects, etc. This price is independent of how that business is capitalized; it's really just based on market conditions. That means that two businesses with identical earnings, assets, prospects, etc. will be valued equally by buyers. If one of those businesses has $2.0M of debt and the other has $8.0M, the buyer doesn’t care because the price they are paying is independent of that fact. It's just like selling a house with a mortgage – the buyer won’t pay more or less if someone has a bigger mortgage, they will just pay a market price for the house.
As a result, from a seller’s perspective, the price they receive for their company is also independent of how much debt it has – they just receive the market price. To then calculate their net proceeds from this selling price, they will need to pay any transaction costs and fees, pay off any debt outstanding, and pay taxes on any gains. What is left is their after-tax net proceeds. Again, this is the same sequence that would occur on the sale of a house or any other asset.
Just to clarify one small point, cash and debt are interrelated concepts. Company owners can choose how much cash and debt they have (i.e. – they can borrow more and hold more in cash, or use cash to reduce debt). As a result, cash is netted against debt when doing the above calculations because the owner could have used that company cash to pay off that amount of debt.
Because every company is different in terms of its cash and debt, an investment bank or M&A advisor will structure an engagement agreement to be independent of cash and debt to avoid confusion. As a result, the selling price (Aggregate Consideration in legal terms) means the total price paid by the buyer (which is the same amount received by the seller), and this has nothing to do with how much debt a company has.
In short, think about how your company is capitalized relative to an offer to purchase. The adjustments for debt and cash are the Sellers' to make when determining net proceeds.