Earn-out


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Earn-out

Refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement.

Earn-Out

In an acquisition, an additional payment made to the acquired company's former owner(s) in the event that certain earnings are met. For example, a company may acquire another for $75 million, with an additional $10 million in cash and/or stock if the acquired company's earnings outperform expectations by a certain percentage. Earn-outs are based on the acquired company's potential future earnings.
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Equity/earn-outs may take a variety of forms: seller leaves some equity in the deal: seller's ownerS/executives stay on with buyer and put some equity in the deal; seller's owners/executives are granted equity in the new company; seller receives a post-closing contractual earn-out based on EBITDA going forward,
Other common forms of consideration include a share exchange, vendor take-back, and earn-out.
When an earn-out is used, parties are incorporating clearer, binary measurements, such as product launch and unit sales, rather than earnings metrics that can be more problematic and lead to disputes.
Earn-outs continue to be popular with 22% of deals containing earn-out provisions.
In addition, the selling stockholders are eligible for a cash earn-out based on a calendar 2015 revenue target.
First-of-its-kind Study Demonstrates that Earn-out Negotiation and Post-Closing Management have a Powerful Impact on Investor Returns
The concept of an earn-out is very simple, yet its proper execution is fiendishly difficult.
The group has now finalised all earn-out liabilities following the completion of the earn-outs, in line with our expectations, relating to the acquisitions of Waterfront Partnership & Conference Company and Merlin Marketing & PR.
Other approaches include forward permanent commitments with long-term earn-out provisions.
Over the next five years, OSI will pay former Ancore stockholders an earn-out of 6% of the price of each PFNA inspection system sold that "represents a potential generational advance above and beyond the current contraband detection systems," up to $750,000 per system.
Our earn-out costs include changes in the fair value of acquisition related contingent consideration, and changes in contingent liabilities related to estimated earn-out payments.
6m) since the end of our financial year and the group will be free of any earn-out liabilities following the successful completion at the end of February of the earn-outs, broadly in line with our expectations, relating to our acquisition of Waterfront Partnership and Conference Company and of Merlin Marketing and PR.