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Earn-out agreement
templateUsed alongside an asset or equity purchase agreement — part of the price is paid at closing, with the rest paid later only if agreed performance targets (revenue, profit, or other metrics) are met. Bridges a gap when buyer and seller disagree on what the business is really worth.
Good fit for
- +Bridging a valuation gap between buyer and seller by tying part of the price to future performance
- +A seller staying involved for a transition period, with their remaining payout linked to how the business performs under them
Not ideal for
- −Simple, fully-upfront-cash deals — this only adds value when a genuine valuation disagreement or performance uncertainty exists
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