A survival period is the expiration period that is dedicated to indemnification claims, which are created under the warranties and representations of an acquisition agreement. According to best practices, between 12 and 24 months is a normal length of time for a survival period; 18 months is also a widely accepted timeframe.
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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