The working capital threshold is a term used in the letter of intent (LOI) and stock purchase agreement (SPA) to identify how much net working capital the buyer expects as part of the net tangible assets in the transaction. The buyer looks to substantiate the enterprise value of the target by comparing it against its net tangible assets, which...
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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