An Introduction To Earnout Structures
While earnout structures have always been viable, the negative impact of Covid-19 has exasperated the “price gap” between optimistic sellers and pessimistic buyers, creating even greater relevance for the earnout structure. An earnout agreement – or sometimes called contingent consideration- is a classic “Win-Win” arrangement. The seller receives what they perceive as fair value only after the buyer meets specific metrics and milestones. The earnout is especially powerful when the business’ future success requires the continued expertise of the buyer.
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