Earn-out

Business sale and purchase.

An earn-out is an arrangement under which all or part of the purchase price on the sale and purchase of a business is calculated by reference to the future performance of the business being purchased.

Earn-outs are commonly used as a management incentive where owner-managed businesses are sold and the managers continue to work in the business for an agreed period following the sale.

See also

• Distribution
• Earnings
• Earnings multiples
• Multiples valuation
• Net profit
• Owner earnings
• Performance
• Price to earnings ratio (PER)