Okuzeka
Contract & Commercial Law vocabulary · Mergers & Acquisitions

Earn-out

Meaning in contract & commercial law, with examples

/ˈɜːn aʊt/nounAdvanced term

In contract & commercial law, earn-out means: Part of the price in an acquisition that is paid later, and only if the business reaches agreed financial targets after the sale.

In Turkish: performansa bağlı ek bedel, kazanca bağlı ödeme

How it is used

Used when buyer and seller disagree on value, especially for fast-growing companies. The SPA defines the targets (often EBITDA or revenue), the earn-out period and how the business must be run meanwhile. Earn-outs frequently lead to disputes.

Example sentences

  1. The sellers will receive an earn-out of up to €2 million if revenue doubles within three years.

  2. The founders stayed on as managers during the earn-out period.

Common collocations

  • earn-out payment
  • earn-out period
  • earn-out targets
  • earn-out dispute
  • acquisitionThe purchase of a company, part of a company or a business, usually by buying its shares or its assets.
  • share purchase agreementThe main contract in a company acquisition, under which the seller transfers shares in the target company to the buyer for an agreed price.
  • closingThe final stage of a deal, when the last documents are signed or exchanged, the price is paid and ownership passes to the buyer.
  • target companyThe company that a buyer plans to acquire or invest in during a merger, acquisition or takeover.

More terms: Mergers & Acquisitions

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This page explains English vocabulary for learners. It is not legal advice.