Earn-out
A variable component of the purchase price that depends, after closing, on the future economic performance of the target company.
With an earn-out part of the purchase price is paid only later, depending on whether agreed metrics (such as revenue, EBITDA or milestones) are reached within a defined period after closing. The instrument bridges differing price expectations and ties the seller to future success, for example where it stays on in management.
Earn-out clauses are dispute-prone because the seller no longer controls the measurement base after completion. The share purchase agreement must therefore set out accounting methods, anti-manipulation protection and participation rights precisely. Alternative ways to fix the price are the locked box and completion accounts.
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This explanation gives a general overview of Austrian law and does not replace advice in an individual case. The specific circumstances of your transaction are always decisive.
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Locked box
A purchase-price mechanism in which the price is based on a fixed, historic reference date and is not adjusted after closing.
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Completion accounts
A purchase-price mechanism with a subsequent adjustment based on closing accounts drawn up as at the completion date.
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Closing
The completion of the transaction at which, once all conditions are satisfied, the shares are transferred and the purchase price is paid.
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Share purchase agreement (SPA)
The central agreement governing the acquisition of a business (share or asset deal), covering the object of sale, purchase price, warranties and completion.
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