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Podcast: The Boardroom Buzz: Grow, Sell, or Exit
Episode: Episode 170 — Earnouts Unraveled: Navigating Risks, Rewards, and Reputation in M&A
Description: Paul and Patrick break down earnouts, those tricky tools that promise to bridge valuation gaps but often lead to unexpected headaches. Ever wondered why earnouts can be such a gamble? Picture this: a seller with a rock-solid EBITDA track record sees their earnout shrink because the buyer reinvests in the business, slashing the payout. So, are earnouts worth the risk, or are they just a ticking time bomb?
Revenue-based earnouts are generally safer than cash-flow ones. Why? Because the deeper you delve into the profit and loss statement, the less control sellers have. But here's the kicker...