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Investment & FinanceStartup Lifecycle
Earn-Out
Acquisition consideration paid contingently after closing based on achievement of agreed milestones (regulatory, revenue, or technical).
Reviewed by Christian Espinosa, Founder, Blue Goat CyberLast reviewed May 9, 2026
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.What this means in practice
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.
Primary references
3 sourcesLink health: 2 verified 1 bot-blocked· last checked 2026-05-09
ABA·1NVCA·1SVB·1
- 1
ABA M&A Committee — EarnoutsBot-blockedABAamericanbar.org
- 2
NVCA Model Merger AgreementVerifiedNVCAnvca.org
- 3
Silicon Valley Bank - Healthcare ReportsVerifiedSVBsvb.com
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