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Earn-outs: The Good, the Bad, and a Little More Bad

One of the many curve balls you can have thrown at you during a sale transaction might come in the form of an earn-out.  The concept is not difficult - if you think your business is worth $80 million and the buyer thinks it's worth $75 million - one way to get over this negotiating stalemate is to agree that the buyer will pay you the $5 million difference over a period of time. The acquirer pays the majority of the purchase price up front and the remainder is contingent on the future performance of the company.  You can "earn" the valuation gap back. So far these seem pretty easy, right? 

The practical parts of putting the earn-out in action are a little more difficult to wrap your head around.  

What Are You Going to Measure?
Tammie Miller
By Tammie Miller
on Sep 1, 2020 10:12:37 AM
   
Earn-outs: The Good, the Bad, and a Little More Bad

One of the many curve balls you can have thrown at you during a sale transaction might come in the form of an earn-out.  The...

Tammie Miller
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