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Often acquisitions are set up with "earn-outs" so that only with the success of the project do you get the full amount of the buy. Even when that's not the case
by kurthr 4y ago
Often acquisitions are set up with "earn-outs" so that only with the success of the project do you get the full amount of the buy. Even when that's not the case your reputation may well be tarnished by any failure (whether technical or managerial) of the product.
I agree with your point though, which is to just walk away with the check unless you're willing to take a significant risks with either of those two other outcomes.
- robbintt 4y agoDo you know where I can read more about the structure of "earn outs"? They seem like just another trap, to be clear.
- kurthr 4y agoI'm not an expert, but I've seen the inside of a couple of deals like this in the $100M range. I saw larger % earnouts than described below (e.g. in the 30-50% range), which were based on milestones (e.g. products going to market on time) and income (e.g. $ customer sales over following several years). It's worth noting that the deals closed in a significant amount of stock so that is also an incentive to keep the buyers price high (but that the earner realistically has limited influence over that). https://news.crunchbase.com/ma/earnout-plan-startup-sale-how-to-use-price/ https://news.crunchbase.com/ma/earnout-plan-startup-sale-how...