What Are Earn-Outs?

Failure to agree on price is one of the most common reasons that M&A negotiations reach a stalemate. The buyer is not willing to commit additional guaranteed dollars to a deal and the seller believes the company is being under-valued. In these situations, there may be an alternative: an earn-out. An earn-out is an additional purchase price for a business that is paid based upon performance criteria that are agreed upon by the buyer and seller. An earn-out can be an effective way to … [Read more...]