Archives For M&A

In defense of earnouts

Matt Bartus —  February 2, 2010 — 2 Comments

Earnouts in M&A transactions are a hot button issue. Basically, an earnout is a way for the buyer of a business to pay money in the future if the business meets certain milestones. It allows buyers to “bridge the gap” between the seller’s and the buyer’s idea of the value. Earnouts get a lot of bad press because they often lead to disputes, hard feelings and sometimes litigation. And they can be notoriously difficult to negotiate due to the tension between the buyer wanting complete control over how it runs the business, and the seller wanting to retain some control to ensure that the value of the earnout is maximized.

However, let’s put something out there: for some startups, earnouts may be the only ticket to the big payday. Continue Reading…