Anyone have a template of earnout structures/convertible seller's note
November 20, 2024
by a searcher from Nanyang Technological University - Nanyang Business School in New Orleans, LA, USA
Hello,
I was wondering if anyone had an excel template, which includes an earnout structure/convertible note?
from University of Toronto in Vancouver, BC, Canada
3. Form of payment for business purchase: (a) $1,800,000 of the Purchase Price shall be paid in cash at closing. (b) $600,000 shall be paid in the form of an Earnout. Below are the details of the earnout: i.Full Payment Criteria: If the EBITDA from existing customers and the current suite of products is $600,000 or more (as advertised for the past 3 years) for year 1 and 2 post acquisition, the earnout will be paid in full. ii.Earnout Adjustment: If the EBITDA from existing customers and the current suite of products falls below $600k, the earnout amount will be adjusted. The adjustment will be calculated by multiplying the shortfall in EBITDA by a 4x multiple (multiple paid for the business). iv. Payment Schedule: The earnout will be paid yearly starting at the end of year 2. The earnout will be paid from excess cash flows after servicing the bank debt. Any cash flow remaining after servicing debt, 50% of it will be paid to the seller in the form of an earnout. The annual earnout paid will be capped at 1/3rd of the total earnout amount. For example, if the business performance does not dip, the seller would be paid $600k earnout and up to $200k annually. iii.Earnout Payment Basis: The earnout amount will be fixed based on the business performance in year 1 and year 2 but will be paid from excess cash flow starting from the end of year 2. The performance of the business after year 2 will not impact the earnout payment and the seller would be receiving a set $ amount.
from The University of Chicago in Chicago, IL, USA
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