Definition
A deferred payment structure in an acquisition where sellers receive additional money only if the business hits specific milestones post-sale. It's how acquirers say 'we believe your projections!' while quietly not paying for them upfront.
Example Usage
The $50 million acquisition included a $20 million earnout based on hitting revenue targets, which the founders never saw because the new owner changed the entire strategy.
Origin
Merger and acquisition terminology from corporate finance
Fun Fact
Studies show that 60-80% of earnouts are never fully paid, making them far less valuable than cash at close despite how they're reported in press releases.
Source: Mergers and acquisitions terminology
Related Terms
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See “earnout” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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