Randy Miller published "Top Six Legal Issues in Earnout Lawsuits" in the October 2013 issue of a Stout | Risius | Ross newsletter.
An “earnout” is an agreement between the buyer and seller of a business where a seller can obtain an additional payment if the business later achieves a financial performance target. The earnout is typically memorized in a purchase agreement and is sometimes expressed as a contingent purchase price, meaning that the buyer must pay an additional purchase payment contingent on future performance of the business. Earnouts can be an effective way to bridge the gap between a buyer and seller at the deal stage, but these provisions frequently spawn lawsuits when the earnout payment is not made.
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