Jul 28, 2021
As a Seller in the current market and for the foreseeable future, you may very well see an Earnout as a component of the deal structure in offers you receive for your business. Why? Because of the uncertainty about the future of the economy, the pandemic, the political climate, lockdowns etc.
In simple terms, an Earnout is a risk allocation structure that generally favors the Buyer. Basically, it is contingent purchase consideration paid by the Buyer to the Seller based on the future performance of the business. It’s akin to a bet.
Your takeaway from this episode should be an understanding of when, why and how an Earnout is used and learning some of the pitfalls for a Seller. We will explore some examples of actual Earnouts, look at some key negotiation points to minimize Seller risk and discuss strategies the Seller can use to possibly gain additional purchase consideration on the sale of their business. So, let’s get started.
Follow along with the podcast using these slides as your reference.