Month: March 2015

Posted By on Mar. 2nd 2015

What is an Earn-out?

In connection with the purchase and sale of a business, including a merger transaction or sale of substantially all of a business’ assets (a merger and acquisition or “M & A” transaction) an earn-out is a mechanism to delay and make contingent payment of a portion of the purchase price. It is a drafting device used to bridge the gap between what a seller (target company) believes it should receive and what the buyer is willing to pay. The earn-out portion of the purchase price is calculated and becomes pay..