earnout


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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.

earnout

A contingency component of an acquisition agreement in which the acquiring company agrees to additional payments in the event certain performance-based goals are achieved. For example, Sylvan Learning Systems in 1995 acquired Drake Prometric for $20 million in cash plus 5.9 million restricted Sylvan common shares. The deal included an additional 2.7 million Sylvan shares to be released to the sellers in the event stipulated revenue goals were met through 1998.
References in periodicals archive ?
Known and unknown risks, uncertainties and other factors include, but are not limited to, the closing of the sale of our CSO business and the possibility of obtaining the contingent payment and the earnout payment.
From the seller's perspective, if the seller is an individual and the earnout is characterized as compensation (including payments for future services and covenants not to compete), the payment will be subject to federal income tax rates of up to 39.
An earnout provision may be included in the initial letter of intent or come into the negotiations at later stages if valuation becomes an issue after due diligence.
If we assume, for example, that an earnout is structured so that there's an extra $5 million payment only if revenues exceed a certain threshold, or for some other reason, then, this contingent payment is nonlinear.
Deciding what to use as a benchmark is one of the preliminary points to determine in structuring an earnout.
Javier and Katsumi are about to begin discussions to craft the elements of an earnout agreement that has value for both sides, with the added challenge of navigating the often tricky waters of cross-cultural negotiations.
The purchase price for the Corus brands and related assets is approximately $52 million plus an earnout over six years based on the performance of the brands.
UK-based IT repair company CRC Group Plc has revised the deal under which it acquired mobile phone repair company AIDL Group in 1998, ending a complicated earnout arrangement that ran until 2001 with a final payment of 3.
Completion of Subsidiary Divestiture and Earnout Reduction
1 times FY13 revenue as upfront and one year earnout based on financial performance parameters.
An earnout is a mechanism to provide payment based on future performance.