Sellers have historically viewed earn outs with suspicion as a way for buyers to get control of their companies cheaply. Earn outs are a variable pricing mechanism designed to tie final sale price to future performance of the acquired entity and are tied to measurable economic milestones such as revenues, gross profit, net income and EBITDA. An intelligently structured earn out not only can facilitate the closing of a deal, but can be a win for both buyer and seller. Below are ten reasons earn outs should be considered as part of your strategy to maximize your selling price and transaction value.
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