Several factors should be considered when determining whether service-related earnouts
are contingent on purchase price or compensation, including, but not limited to:
can be extremely complicated or relatively simple, depending on the transaction, but they are never cookie-cutter and have a relatively high risk of future litigation or arbitration unless carefully considered, crafted and documented on the front end.
On the other hand, some other earnouts
might have very low probability, very high risk, or have an option-like payout that pays a percentage of revenues or earnings above some high threshold.
Many professionals think that earnouts
should only be used if absolutely necessary to complete the transaction.
As the shareholder representative, SRS manages all post-closing matters, including working capital and other purchase price adjustments, tax reviews, earnouts
, the handling of claims, disputes and litigation, communications with acquirers and selling shareholders, and management and distribution of escrow and expense funds.
become litigation fodder when earnout
stakeholders can allege that the acquirer interfered with their ability to meet earnout
terms are normally between one and four years
FASB also is mulling requirements for how companies account for merger-related restructuring expenses, such as the expense of relocating employees and bookkeeping for earnouts
Available in three-, five-, or seven-year terms, the flexible fixed-rate product also offers additional fundings and earnouts
, partial releases and property substitutions.
The answer will help determine whether to buy, reach a purchase price, establish earnouts
and get financing.
There are minimum revenue requirements for each of the earnouts
, the total minimum of which equals $84 million.
In addition to the cash purchase price, Vulcan will also be entitled to receive cash payments under two separate earnouts
, subject to certain conditions.