Earnouts: Taking a Wait and See Approach to Valuation of Closely Held Companies
Total Credits: 1 including 1 Alabama CLE Credit
- Average Rating:
- Not yet rated
- Categories:
- Business Law
- Faculty:
- Frank Ciatto | Daniel Straga | James DePaoli
- Original Program Date:
- Apr 01, 2025
- License:
- Never Expires.
Description
The most highly negotiated provision of most transactions is price. Sellers want to maximize the value of the deal, putting the most optimistic spin historical and forward-looking projections. Sellers take a more skeptical view, questioning the sustainability of growth and the accuracy of forecasts. When differences over valuation cannot be bridged, the parties may use an earnout, which allows them to both take a wait-and-see approach and still close the transaction. Earnouts generally involve a current payment from buyer to seller together with ongoing payments to the seller if the company performs as the seller projected. But there are many drafting and operational traps when using earnouts. This program will provide you with a practical guide to structuring and drafting earnouts to later disputes and litigation.
Schedule:
- Most highly negotiated and litigated provisions in earnout agreements
- Post-closing operations – control by buyer, but informational access to seller
- Defining key metrics – objective, measurable and potential traps
- Relationship of earnouts to senior debt and other preferential returns
- Debt issues and how it impacts financial results – and post-closing payments
- How earnouts are different than escrow and holdbacks
Handouts
| Handout 1 (475.3 KB) | 41 Pages | Available after Purchase |
Faculty
Frank Ciatto Related Seminars and Products
Venable, LLP
Frank Ciatto is a partner in the Washington, D.C. office of Venable, LLP, where he has 20 years’ experience advising clients on mergers and acquisitions, limited liability companies, tax and accounting issues, and corporate finance transactions. He is a leader of his firm’s private equity and hedge fund groups and a member of the Mergers & Acquisitions Subcommittee of the ABA Business Law Section. He is a Certified Public Accountant and earlier in his career worked at what is now PricewaterhouseCoopers in New York.
Daniel Straga Related Seminars and Products
Venable, LLP
Daniel G. Straga is counsel in the Washington, D.C. office of Venable, LLP, where he counsels companies on a wide variety of corporate and business matters across a range of industries. He advises clients on mergers and acquisitions, capital raising, venture capital, and governance matters.
James DePaoli Related Seminars and Products
Venable, LLP
James DePaoli is an attorney in the Washington, D.C. office of Venable, LLP, where his practice focuses on corporate and commercial matters. He represents clients in the acquisition and disposition of assets and securities, mergers, and other business combinations and reorganizations. Mr. Paoli earned his B.S/B.A., magna cum laude, from Georgetown University and his J.D. from Duke University School of Law.
