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

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


Wednesday, December 2, 2020

1:00pm-2:30pm EST, 10:00am-11:30am PST

Early Registration Discount Deadline, Friday, November 6, 2020

or call 1-800-926-7926

This CLE webinar 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 the latest SRS Acquiom Survey regarding earnout provisions in M&A transactions, and how that may inform earnout negotiations.

Description

Due to the economic uncertainty created by COVID-19, buyers and sellers of companies are less likely 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 deter disagreements during the negotiation of the deal price only to result in post-closing disputes over the earnout itself. Counsel must draft explicit, specific, business-contextualized provisions and procedures on calculating the earnout and the parties' respective obligations. 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, 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.

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Outline

  1. Earnouts
    1. Current market trends: impact of COVID-19
    2. Determing 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 covenant: buyer and seller
    4. Determining when performance metrics have been acheived
    5. Resolving conflicting positions 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 correct 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

Noble, Andrew
Andrew Noble

Director, Dispute Management
SRS Acquiom

Mr. Noble works with selling shareholders to resolve post-closing claims for indemnification, earnout and milestone...  |  Read More

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

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