M&A Earnouts and Economic Uncertainty: Negotiating and Structuring, Best Practices for Avoiding Disputes

A live 90-minute premium CLE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Wednesday, October 12, 2022

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

This CLE course will examine the components of a well-structured earnout and discuss best practices for designing earnouts to minimize disputes. The panel discussion will also include results from recent ABA and SRS Acquiom Deal Term Studies regarding earnout provisions in M&A transactions, and how market trends may shape earnout negotiations. This discussion will focus on the use of earnouts outside of life sciences transactions.

Description

In the current economic climate, buyers and sellers of companies are less able to predict the future performance of a target business, and M&A transactions are more likely to include earnouts (and in more significant amounts) than before. Earnouts can be useful in allocating the future risks and rewards of a target business but have become more challenging to design and implement in the current economic environment.

Earnouts often smooth over disagreements during the negotiation of the deal price only to result in post-closing disputes over the earnout itself. Counsel must draft explicit and specific performance metrics tailored to the target business, as well as precise methodologies to calculate the achievement of the earnout. A key objective is to avoid disputes over the achievement of the earnout post-closing or resolve them quickly.

Listen as our authoritative panel explains recent trends in the use of earnouts during the pandemic, the pros and cons of including them in M&A deals, and strategies for structuring earnout terms in a way that benefits and protects both buyers and sellers.

READ MORE

Outline

  1. Earnouts
    1. Current market trends
    2. Determining when an earnout is appropriate for the transaction
    3. Performance metrics and other threshold issues
  2. Structuring earnout provisions
    1. Operating control issues
    2. Dealing with unanticipated events
    3. Post-closing covenants from buyer and seller perspectives
    4. Determining when performance metrics have been achieved
    5. Resolving conflicts regarding the earnout

Benefits

The panel will review these and other critical issues:

  • When is an earnout the right tool to bridge the valuation gap?
  • What is the best metric to use for an earnout, and how is it best defined?
  • What covenants are appropriate for operating the target business after closing with respect to the earnout?
  • What dispute resolution provisions should be included in the purchase agreement regarding the earnout?

Faculty

Pryzant, Paul
Paul Pryzant

Partner
Seyfarth Shaw

For over 35 years, Mr. Pryzant has represented clients in a variety of mergers and acquisitions, equity and debt...  |  Read More

Saxman, Suzanne
Suzanne L. Saxman

Partner
Seyfarth Shaw

Ms. Saxman is Chair of the firm’s M&A group. For more than three decades as a corporate lawyer, she has...  |  Read More

Dorough-Lewis, James
James Dorough-Lewis, Ph.D., LL.M.

Attorney
Seyfarth Shaw

Mr. Dorough-Lewis' experience in the corporate and federal government sectors allows him to navigate the...  |  Read More

Attend on October 12

Cannot Attend October 12?

You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

Download