An earnout is an agreement that promises additional future compensation to the seller of a business if that business achieves specific future financial goals. The seller may be willing to accept a lower sales price at closing if an earnout is included as part of a negotiated transaction. With the M&A market adjusting to a slowly reviving but still uncertain economy, the rising use of earnout provisions suggests that dealmakers are seeking a shortcut solution to financing challenges that will help close the gap between buyers’ and sellers’ expectations. Despite intensive due diligence and financial analysis, many buyers may remain uneasy about a target company's financial performance and profitability post-closing. Earn-out payments can help buyers...