In the current tough climate for deals, acquirers are increasingly using earnouts as part of the purchase price, which is why I've discussed the topic in a couple of recent magazine columns. The first,
Arguments postponed, warns of disputes and litigation down the road for some of these dealmakers. The second,
The Entrepreneurial Acquirer, looks at the case in favor of earnouts, as made by Jim McCann, CEO of 1-800-Flowers.com Inc.
Now, for the last word on the topic (for a little while, anyway), readers can visit a
blog post by Tom McLain, an M&A lawyer with Chorey, Taylor & Feil in Atlanta. McLain draws a useful distinction between what he calls business performance earnouts, used to bridge valuation gaps, and retention earnouts, used to retain talent. He finds the latter a little more likely to work as intended.
Tom, by the way, is a member of our Corporate Dealmaker connection on LinkedIn. You can find out more about that by clicking on the link below. -
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