A detailed guide explaining the pros and cons and the methodology of Earnout structures.

Rescue the Deal

Know when to use Earnouts to reduce risk, break a negotiation deadlock and get it done.

Covering both buyer and seller perspectives, this 18 page guide breaks down Earnouts from every angle, so you know how and when to use them (or not) and how to prevent  disputes down the road, if you do.  

In this white paper you'll learn:

  • The best and most effective use-cases

  • A framework for analyzing Earnout structures

  • Empirical evidence that Earnouts reduce buyer risk
    • Company team
    Here’s a few of the valuable insights you’ll get from this guide:
    • Why a seller's willingness to consider an Earnout can be a deal breaker, in and of itself.
    • How savvy buyers might pitch an Earnout structure just to measure a seller's confidence.
    • The risks of tension, or worse litigation, if either buyer or seller don’t do as they promised.
    • How earnouts can effectively serve as a financing option which lowers the buyer's risk.
    • The risks and consequences of buyer overreach during the earnout period.
    • What to do to avoid being enslaved forever in the company you're trying to sell.
    • Why sellers should always anticipate an Earnout structure coming up in negotiations.
    • How sellers can avoid getting stuck with Contingent payments that never pay out.
    • The 5 most common scenarios where using Earnout structures makes sense.
    • How to calculate contingent payments and the overall framework for measuring performance.
    • The seven structural elements of any Earnout agreement.
    • The typical percentage range of the total purchase price that can be expected as an upfront payment.
    • What precautions to take if you want to prevent ending up in court over Contingent payouts.
    • Proof of how Earnouts play out an effective downside/risk mitigation tool.

    AUTHOR

    Javier Enrile Managing Director | M&A, Principal Global Investors

    Javier is a senior executive with over two decades of experience (both as an investor and a business operator) in assisting financial services and technology companies achieve strategic growth objectives.

    Company team