Earn-out agreements are used when one company acquires another, and make the final purchase price depend on the performance of the acquired company after the transaction. As James Blake explains, in this economy, with a general fear of risk, earn-out agreements can ultimately increase the price for which an entrepreneur sells their startup. However, a seller must be careful, as an earn-out agreement without proper protections can allow the buyer to determine the ultimate purchase price.
- Summary by FizzLaw Team
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Exit Strategy: Selling a Business for More with an Earn-Out Agreement