Contingent consideration
Earn-Outs
Earn-outs can bridge measurable uncertainty, but poor definitions can replace one valuation disagreement with years of post-close disputes.
Buyer lens
Use contingent consideration only for uncertainty that is specific, measurable and affected predictably by post-close control.
Seller lens
Understand exactly which metric, accounting policy and buyer decisions can influence the payout.
Why it matters
- Revenue, gross profit and earnings can all be affected by buyer decisions.
- An earn-out should not postpone evidence that could be resolved before closing.
- Founder transition and customer retention may be more appropriate triggers than vague future performance.
Evidence to reconcile
- Earn-out formula
- Historical metric bridge
- Accounting definitions
- Operating-control assumptions
- Legal protections