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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earnout

References in periodicals archive

But if they do, they will be bucking a well-established trend, where business-dam- aging earn-outs blunt the brilliance of those agency brands we all regard as high- water marks in creativity.

Advertising's next top model

While contingent consideration assets (clawbacks) are seen in about 5 percent of the transactions in a broader dataset of transactions with contingent consideration, the focus here is on earn-outs. The median earn-out period for these 120 transactions is three years.

Lessons learned in valuing contingent consideration: contingent consideration is doing the job it was intended to do--protecting the buyer against downside risk, allowing the seller to share in upside potential and letting both sides meet in the middle

This includes determining whether the earn-out should be tied to revenue, operating margins, profit, or a combination of these benchmarks.

Creative ways of structuring deals: the concept of an earn-out is very simple, yet its proper execution is fiendishly difficult

Under current GAAP, earn-out payments are recorded in the acquirer's financial statements only if and when they are earned.

The valuation of earn-outs and acquired contingencies under SFAS 141 (R)

A traditional earn-out can be a good solution when a seller is confident about achieving hockey-stick forecasts.

Valuation gap: breaking the impasse

When structuring an earn-out, the purchaser and vendor should address the basis of measurement (revenues, operating profits, and so on), the length of time the earn-out is in place, and whether the vendor has an opportunity to "catch up" if targets are missed in a given year.

Let's make a real deal: looking beyond price in mergers and acquisitions

25 August 2016 - UK-based B2B media company Ascential plc (LSE: ASCL.L) has agreed to acquire 100% of Salt Lake City, Utah, USA-based e-commerce analytics provider Oneclickretail.com LLC for initial cash consideration of USD 44m plus future earn-outs.

Ascential Acquires E-Commerce Analytics Firm One Click Retail for USD 44m

"This latter approach was recently employed when SBO obtained a 5-year construction loan commitment plus a 5-year earn-out with respect to a substantial 80/20 project located in midtown New York.

SBO adapts to the times

There was a significant increase in the use of earn-outs in European M/A in 2014, rising from 14% of deals in 2013 to 19% and indicating confidence in future performance by sellers.

Pro-Seller Deal Structures Spur European M/A Activity, According to CMS

Under the terms of the agreement, PCM will pay an initial purchase price of USD 15m in cash and certain contingent earn-out consideration over a three year period.

Deal snapshot: PCM TO ACQUIRE ASSETS OF CALIFORNIA IT SOLUTIONS COMPANY FOR USD 15M

The total consideration payable under each proposal includes maximum earn-out payments of EUR800m tied to performance milestones and the vendor is currently seeking a guaranteed minimum payment of EUR7bn excluding earn-outs, the Brazilian newspaper explained.

Oi seeks improved bids for PT's Portuguese operations - report

The consideration also provides for an earn-out payment to a value of 1.3m shares tied to particular sales targets between 2015 and 2017.

Vitrolife closes acquisition of FertiliTech