Negotiating Earnouts in M&A Transactions: Effective Approaches to Bridging the Valuation Gap

Structuring Clauses to Protect Buyers and Sellers, Reduce Post-Closing Disputes

Recording of a 90-minute CLE webinar with Q&A


Conducted on Thursday, November 12, 2015

Recorded event now available

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Program Materials

This CLE webinar will guide deal counsel in negotiating and structuring earnout clauses in M&A agreements that benefit buyers and sellers and reduce the likelihood of post-closing disputes.

Description

Earnout provisions are routinely included in M&A transactions as a valuation-bridging mechanism to help alleviate concerns by both parties about tendering or receiving a fair purchase price. Earnouts can allow either an upward price adjustment post-closing—when sufficient value is created to justify a higher purchase amount—or innovative financing for an originally agreed upon price.

While earnouts are a beneficial tool for parties in M&A deals, transactions involving earnouts are complex and fraught with risk. Counsel advising buyers and sellers should cautiously consider whether earnouts are suitable for their transactions and carefully structure them when negotiating the deal.

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
    2. Advantages and disadvantages of earnouts
    3. Relevant performance benchmarks
  2. Structuring earnout provisions
    1. Determining operating control issues
    2. Dealing with unanticipated events
    3. Protecting against fraudulent actions
    4. Post-closing activity by buyer and seller
    5. Resolving conflicting positions
    6. Tax and accounting implications

Benefits

The panel will review these and other key issues:

  • What approaches have been effective for negotiating performance benchmarks in deals involving earnout provisions?
  • What post-closing concerns should buyers and sellers anticipate and address during deal negotiations?
  • What are the key tax issues to understand and consider when using earnouts?

Faculty

Christopher M. Flanagan
Christopher M. Flanagan

Partner, Moderator
Locke Lord

Mr. Flanagan's general corporate and partnership tax practice focuses on tax planning and analysis in the...  |  Read More

Herman, Dimitry
Dimitry Herman

Founder and Managing Partner
Herman Law

Mr. Herman serves as outside general counsel to growing technology companies and as deal counsel for venture...  |  Read More

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