Suzanne Saxman, Paul Pryzant, and James Dorough-Lewis Panelists for Strafford Webinar "M&A Earnouts and Economic Uncertainty: Negotiating and Structuring, Best Practices for Avoiding Disputes"

Suzanne Saxman, partner in Seyfarth's Corporate department and chair of the Mergers & Acquisitions practice group, Paul Pryzant, partner in Seyfarth's Corporate department, and James Dorough-Lewis, associate in Seyfarth's Corporate department, will serve as panelists for the Strafford webinar "M&A Earnouts and Economic Uncertainty: Negotiating and Structuring, Best Practices for Avoiding Disputes" on October 12, 2022.

Description

In the current economic climate, buyers and sellers of companies are less able to predict the future performance of a target business, and M&A transactions are more likely to include earnouts (and in more significant amounts) than before. Earnouts can be useful in allocating the future risks and rewards of a target business but have become more challenging to design and implement in the current economic environment.

Earnouts often deter disagreements during the negotiation of the deal price only to result in post-closing disputes over the earnout itself. Counsel must draft explicit, specific, business-contextualized provisions and procedures on calculating the earnout and the parties' respective obligations. A key objective is to avoid disputes over the achievement of the earnout post-closing or resolve them quickly.

The panel will explain recent trends in the use of earnouts, the pros and cons of including them in M&A deals, and strategies for structuring earnout terms in a way that benefits and protects both buyers and sellers.

The panel will review these and other critical issues:

• When is an earnout the right tool to bridge the valuation gap?
• What is the correct metric to use for an earnout, and how is it best defined?
• What covenants are appropriate for operating the target business after closing with respect to the earnout?
• What dispute resolution provisions should be included in the purchase agreement regarding the earnout?