How to Structure Earn Outs in Business Mergers & Acquisitions

There are important factors to consider as the buyer or the seller when structuring the terms of an M&A earnout (or earn out or earn-out), which may be critical to the success of your deal structure.

When selling a business, the sales/purchase price can come in different forms. You may get paid as a mix of cash and seller financing, stock in the company, etc.

An earnout is essentially a variable purchase price based on the performance of the business post-closing. If the business meets certain metrics in the hands of the buyer, the seller is paid an additional amount.

As Brett explains, this structure works to align the interests of both the buyer and the seller of the business. But, there are very important factors to consider as the buyer or the seller when structuring the terms of your earnout that are absolutely critical to the success of this deal structure.

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Have questions? Book a call, and talk to Brett today:
rebrand.ly/clarity-brettcenkus114

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You can reach Brett through:

linkedin.com/in/brettcenkus
twitter.com/BCenkus
cenkuslaw.com
braatenwoods.com
merger-resources.com


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Brett A. Cenkus has 20+ years of experience in business law, finance, and entrepreneurship. Through Cenkus Law, PC, he provides advice and services for mergers & acquisitions (M&A), securities offerings, founders’ agreements, and other general business law issues.

Through Braaten Woods, LLC, Brett helps business owners in the lower middle market ($2MM - $25MM) position themselves for sale, find buyers, negotiate, and close M&A deals.

Brett also maintains merger-resources.com, a site packed with free articles, videos, checklists, deal diagrams, template contracts, and other tools to help pass M&A knowledge to others.

Brett regularly consults with entrepreneurs and invests his own capital as an angel investor.

From 2010-2013, Brett served as Chief Legal Counsel of a publicly-traded international oilfield services company. From 2001 to 2006, he and a partner founded and built Paragon Residential Mortgage. Bridge Investments acquired Paragon in 2006.

Brett holds a Juris Doctorate from Harvard Law School and a Bachelor of Arts degree in Economics from Messiah College in Grantham, Pennsylvania.

Brett lives in Austin with his wife, Cathryn, and two children. He enjoys reading, squash, classic movies, great food and wine, and the New England Patriots.


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