Business Buyout & Earn-Out Agreements for Buying or Selling a BusinessBy James Blake on
If you are buying or selling a business in Texas, an earn-out agreement can be a useful part of your company acquisition, business partner buyout, company merger, or other business acquisition contract. An earn-out agreement can provide a potentially higher purchase price for someone selling a company in Texas, while hedging risks for those buying a business. A Texas business lawyer can help you review and draft your business acquisition contracts, and help you structure risks with M & A documents that include well structured earn-out agreements and other company acquisition strategies.
How Earn-Out Agreements Work in Business Buyouts
If you’re buying a business with an earn-out agreement, you’ll typically commit to a minimum purchase price. Additional payments for the business buyout will be scaled to the company’s performance, to the performance of a company’s particular product line, or other factors stipulated in the M & A documents.
If you’re selling a company, the lower minimum purchase price helps attract buyers, and you may get paid a much higher purchase price long-term. A Texas business lawyer can advise your business buyout, business acquisition contract, and earn-out agreement to limit risks and increase the upside for selling a business in Texas while allowing a business purchaser to buy a company otherwise unaffordable without an earn-out agreement.
Dangers of Earn-Out Agreement Contract Terms & Conditions
Every company acquisition, business merger, or business partner buyout must be well structured with business acquisition contracts and advice from a merger attorney or acquisition lawyer. If you’re selling a company, the earn-out agreement should cover all contingencies, including company or asset flipping, and should stipulate accounting methods to prevent accounting manipulation. If you’re buying a business in Texas, make sure your earn-out agreement terms are fair, that accounting methods are clear, and that it doesn’t give away too much of your value-add.
An earn-out agreement can improve overall business buyout efficiency. Our Texas business law firm regularly advises company acquisitions, business partner buyouts, company mergers, and other business acquisition matters. Before buying or selling a business in Texas, talk with a Texas business lawyer at our Austin law firm.
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