How are Earnouts commonly funded in a SF?

by a searcher from IE Business School

4 days ago

Which of the following options: Operating Cash Flow of Acquired Company, Bank Debt, Follow-on Investment from Cap Table, Escrow / Holdback when fundraising for the Acquisition

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searcher from IESE Business School

Yup, it is an 'earn' out, so the business has to earn enough to give enough. So the conditions should generally align to be able to give from operating cash flow. If you screwed up the incentives somewhere or are using that cash for something else, refinancing is the next cheapest option. You want to protect your equity as much as possible

1 day ago | like reply | 0 likes

searcher from East Tennessee State University

Hot take: If an earnout is structured properly with aligned incentives, you'll pay it out of operational cash flow and not feel too much of an impact.

3 days ago | like reply | 0 likes

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