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.
Note: This material qualifies for self-study credit only. Pursuant to Regulation 15.04.5, a lawyer may receive up to six hours of self-study credit in a reporting year. Self-study programs do not qualify for ethics, elimination of bias or Kansas credit.
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