Equity Rollover vs Earnout-Is one better than the other?

by a searcher from Keller Graduate School of Management of DeVry University

8 months ago

I am in the process of submitting an LOI for a company that has experienced tremendous growth in the current year and has contracts for future growth, far exceeding previous years revenues and earnings.  The seller is willing to do a substantial equity rollover but I am wondering if an earnout might make more sense.  Would love to get feedback from those that have used earnouts and equity rollovers in deals or any other creative strategy to handle this situation. Thanks so much in advance!

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9 comments

searcher from University of Oxford

As others have commented, an equity roll is more of a partnership and likely better suited if the seller will remain somewhat involved in the business post close. An earn out is a structure that's typically used to bridge the gap between buyer and seller expectations in post close performance, on which the valuation is the set

6 months ago | like reply | 0 likes

searcher from Keller Graduate School of Management of DeVry University

Thank you all so much for great information and advice. I greatly appreciate it!

8 months ago | like reply | 0 likes

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