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Investment & Finance

Earn-Out

In one line

Acquisition consideration paid contingently after closing based on achievement of agreed milestones (regulatory, revenue, or technical).

Definition

An earn-out is a portion of acquisition consideration paid after closing only if the acquired business achieves agreed milestones — typically FDA approval, CE marking, revenue thresholds, integration milestones, or specific technical achievements. In MedTech, where regulatory and commercial risk is concentrated in identifiable inflection points, earn-outs are extremely common and may represent 30-60% of total deal value. Earn-outs can take the form of cash payments, contingent value rights (CVRs) traded as securities, or escrowed equity.

Why it matters

Earn-out disputes are one of the most litigated areas of M&A. Common flashpoints: who controls the post-close business decisions that drive milestones, whether buyer must use commercially reasonable efforts, and how revenue is measured.

Common pitfalls

•Drafting earn-out triggers loosely so the buyer can de-prioritize the program post-close.
•Failing to negotiate operating covenants that protect the path to earn-out.

Sources

ABA M&A Committee — Earnouts · ABA
NVCA Model Merger Agreement · NVCA
Silicon Valley Bank - Healthcare Reports · SVB

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Why compare MedTech terms side by side?

MedTech terminology is full of pairs that look interchangeable but carry very different regulatory, clinical, and commercial consequences. Picking the wrong framework, pathway, or standard early in a project can add months to a submission, invalidate clinical evidence, or trigger an audit finding. Side-by-side comparison is the fastest way to surface those differences before they become costly mistakes.

Each comparison on this page pulls from the same vendor-neutral, sourced definitions used throughout the MedTech Terms glossary. You see the one-line summary, the formal definition, why it matters in practice, common pitfalls, and the primary sources (FDA guidance, EU MDR/IVDR articles, ISO/IEC standards, MDCG documents, IMDRF principles) that back each entry. That makes the comparison defensible in regulatory strategy memos, design reviews, and submission narratives.

Common comparison patterns

Regulatory pathway choice - 510(k) vs PMA, 510(k) vs De Novo, Abbreviated vs Special 510(k).
Quality systems - QSR vs ISO 13485, QMSR vs QSR.
Software classification - SaMD vs SiMD, Locked vs adaptive AI.
EU frameworks - MDR vs IVDR, CE Mark vs UKCA.
Cybersecurity artifacts - SPDX vs CycloneDX SBOM, CVE vs CVSS.
Post-market actions - Recall vs field action, Removal vs correction.

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MedTech Terms is a vendor-neutral community resource sponsored by Blue Goat Cyber. Definitions are written for educational use and are not legal or regulatory advice.