100% earnout for distressed business?

Sounds very unusual even in such a situation

^Luke Tatone‌ - thanks for the tag. My background is in distressed, I'm not certain I've seen an acquisition structure that is 100% earnout contingent - but, in the abstract at least, it is often useful to model these opportunities as deeply out-of-the-money real options (simplifying, probabilistically, your return is nothing, but with a small possibility of upside). As others have rightly noted, this is going to be exceptionally fact-dependent. Is the nature of the distress operational, financial, or both? Can the biz pay its ordinary course bills now? Is it solvent (from both an income statement and balance sheet perspective). The existing capital structure is crucial. If there's debt, it's of course going to have priority over the equity in a bankruptcy. If there's no debt, you may actually want to consider structuring the investment as first-lien senior secured loan with provisions for equity conversion (plus, you'll be able to credit bid in a chapter 11 proceeding). If the company is getting into that zone where a chapter 11 filing seems likely, you may well be able to extend a superpriority DIP Loan and/or get the assets at fire sale prices in 363(a) sale. Your note that existing ownership is willing to leave some working capital does suggest that perhaps the biz isn't cash flow insolvent, at least not yet. No matter the approach, you want this to be an asset acquisition, without successor liability. And if there are current creditors, you may also want to reach out with them and take their temp on possible collaboration. These thoughts are just top of the head and only scratch the service, neither legal nor financial counsel. But I'd be happy to have a look at details. Please feel to DM anytime and all the best, MB