What's the best structure for an earn-out here?

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July 05, 2022

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

What's the best structure for an earn-out here?

Situation:

The owners are being forced to sell (personal issues) before they would like. They want to keep running the business for a few more years to hit some ARR goals and get a higher price.

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Reply by a searcher
from Norwich University in Maryland, USA
Ask them what they want. Maybe he/she wants to still run the business for 5-7 years. Do seller financing for 60-70% of the business over that time period. You would control the company and you could decide if the remaining 30-40% would be bank financed or seller gets paid at end of term based on new EBITDA or revenue formula that you work out.
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Reply by a searcher
in Loudon, NH, USA
Are you looking to buy 100% of the business all at once? How much of the value are you looking to use an earn out for?
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