M&A GLOSSARY
Earnout
Earnout
Contingent acquisition consideration tied to future performance.
What does Earnout mean?
Contingent acquisition consideration tied to future performance. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Earnout in context
The seller receives an additional payment if revenue exceeds the agreed target.
Why it matters in financing
Earnout can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related m&a terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.