Structuring Earnounts In M&A Transactions

An earnout is a mechanism in M&A transactions that allows the seller to receive additional compensation if the business achieves certain financial or operating targets after closing. Earnouts can bridge a valuation gap between a seller and skeptical buyer and are often used for startups that don’t have much operating history but have growth potential.

There aren’t any hard and fast rules when it comes to structuring an earnout, meaning there are a number of structural considerations that are open to negotiation. This article examines some of those key considerations. Read more.