Mergers & Acquisitions

Resources: Glossary

Don’t be confused or intimidated by any terms or abbreviations in the M&A world. You’ll find answers here.

Earnout

Definition

An agreement whereby the buyer pays part of the purchase price to the seller based on the future performance of the company, or the fulfillment of some other specified event.

Tips

Earnouts are difficult to administer and are easily manipulated by the parties. Earnouts are commonly used by private equity groups, although they are used as a small percentage of the overall purchase price.

Related Resources

Earnouts When Selling or Buying a Business | Complete Guide

Should I consider an earnout when selling my business?