Earn-out clause

Earn-out clau­ses involve the deter­mi­na­tion of varia­ble purchase price compon­ents that become due at a certain point in time after the trans­fer of the company depen­ding on certain earnings compon­ents. In prac­tice, corpo­rate tran­sac­tions threa­ten to fail because the buyer and seller cannot agree on the future earnings poten­tial of the company. The aim of earn-out clau­ses is to bring a tran­sac­tion to a successful conclu­sion despite diffe­ring purchase price expectations.