A lockup transaction is a contractual device that the buyer and seller negotiate in an acquisition agreement. Without such an agreement, an initial bidder would be unwilling to expend its resources to bid, knowing that others would take advantage of the initial bidder’s efforts. Lockups are important to protect the expectancy interest of the...
An earnout is a financing arrangement for the purchase of a business in which the seller finances a portion of the purchase price, and payment of this amount is contingent on achieving a predetermined level of future earnings. An earnout is often used to bridge a valuation gap. The seller only gets paid if the predetermined level of future EBITDA or other financial targets are achieved.
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