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Earn-out
Practical Law UK Glossary 9-107-6184 (Approx. 4 pages)
Glossary
Earn-out
A transaction pricing mechanism under which all or part of the purchase price for the sale and purchase of a target business or company is calculated by reference to (or is contingent on) the target's post-completion performance. Commonly used:
- To bridge valuation gaps between buyer and seller.
- As a management incentive where owner-managed businesses are sold and the managers continue to work for the target for an agreed period following the sale.
For further information, see Practice note, Earn-outs.