It’s all about YOUR RISK TOLERANCE and RISK SHARING.
- Most buyers today are reluctant to use ‘cash only’ as their preferred model for acquisitions. However, when buyers see the acquired business as a springboard for growth they prefers to keep the upside potential of the business in which case earn outs are not preferred.
- Sellers are usually reluctant to accept Earn Outs without control of their own destiny.
- When either party or their professional advisors try to mitigate all risk, deals don’t get done.
- Think of Earn Outs as Risk Sharing
- Don’t forget to take account of tax implications of Earn Outs.
Goal seek a win-win solution by taking some calculated risks to get a deal done and maximize what you can get for your business.
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