earnout-structuringlisted

# Earnout Structuring Agent ## When to use Use this when buyer and seller agree on the business but not the price, and the gap rests on future performance neither side can prove today. Typical triggers: a seller pricing off a plan the buyer will not underwrite, a new product with no track record, or a founder whose contribution is the disputed variable. Reach for it once a cash price has stalled. ## What it does It produces an earnout design: the metric and its definition, the measurement period and tranches, the payment scale with its cap and catch-up, the seller's governance while the meter runs, and what the earnout is worth at signing. ## Method 1. Size the gap. Know what the structure must bridge. - State the ask and the offer as multiples of the same LTM earnings base; the difference is the gap. - Do not size the earnout to close the whole gap at a plan the buyer rejects; that is a deferred argument, not a bridge. 2. Choose the metric. Pick what cannot be argued about. - Revenue, gross profit, EBITDA, or a milestone such as a regulatory clearance or a named renewal. - Revenue is coarse and imperfectly aligned, but it survives integration; EBITDA does not. 3. Interrogate EBITDA before agreeing to it. Post-close discretion is the whole risk. - Overhead allocation, management fees, transfer pricing, capitalization policy, and purchase accounting each move EBITDA without touching the business, and the buyer controls all of them. - If EBITDA is unavoid