Document background
The Earnout Agreement is commonly used in merger and acquisition transactions under English and Welsh law when there's uncertainty about a business's future performance or disagreement about its valuation. This document establishes the framework for additional payments to the seller based on the business achieving specific performance metrics post-acquisition. The agreement typically includes detailed provisions for calculating earnout payments, defining performance metrics, specifying payment terms, and establishing dispute resolution mechanisms. It's particularly valuable in situations involving high-growth companies, uncertain market conditions, or when retaining key personnel is crucial to the business's success.
