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There’s an old saying, that a bridge shows no allegiance to either side. It’s a wonderful metaphor and one that dealmakers would be wise to remember when working to construct agreements to solve for divergent views on value.
Earn-outs can take many different shapes, but the basic concept involves a seller receiving a promise of additional consideration from buyer in the future if certain agreed upon milestones are achieved.
Call it a compromise, call it delayed gratification, but do not call it simple: earn-out payments often give rise to disputes because the interpretation of what qualifies as the achievement of previously negotiated milestones can differ wildly once viewed through the muddied lens of time.
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