earnout - Investment & Finance Definition
In a merger transaction, an additional payment or series of payments that is based on the performance of the company after the acquisition. In essence, the final amount that the acquirer pays is dependent on the company’s financial performance after the sale. On a present-value basis, the seller likely is not receiving the full amount that he or she wanted by waiting several years for future payments, but the seller is getting more funds than he would have without the earnout. Earnouts can be based on revenue or earnings or any other financial measure.