Mergers and Acquisitions Can Take a Long Time to Market, Negotiate, and Close Accordingly, a reasonable counter-offer on price ordinarily should not be poorly received.

As good negotiators, buyers hold something back, leaving room for final вЂњconcessionsвЂќ to close the deal. Buyers rarely make their best offers initially. Even if a number proposed by a buyer вЂњfeelsвЂќ right, consider making a counter offer. Although an earnout poses significant risks for a selling company and its stockholders, it also establishes a path for the selling stockholders to ultimately achieve the return they seek in the sale of the company, based on the continuing performance of the business following the closing of the transaction.ДЇinally, do not be afraid to negotiate. An earnout is a contractual provision in the M&A agreement that allows a seller to receive additional consideration in the future if the business sold achieves certain financials metrics, such as milestones in gross revenues or EBITDA. If you and the potential buyer are unable to agree on an acquisition price, consider an вЂњearnoutвЂќ as a way of bridging this difference of opinion. Whether your company is a meaningful IPO candidate.Whether there are multiple bidders for your company or a single interested party.Your companyвЂ™s prospects and opportunities for additional financing rounds.The experience and expertise of the management team.Business, financial, and/or legal risks your company faces.The proprietary technology your company owns or licenses.Your companyвЂ™s projected financial growth.The trends in your companyвЂ™s historical financial performance.Your companyвЂ™s most recent 409A valuation (appraisal of the fair market value of your companyвЂ™s common stock).Prices paid in recent sales of shares by employees and early stage investors.The valuation used in your companyвЂ™s last round of financing.Whether the buyer is a financial buyer (such as a private equity firm that may value your business based on a multiple of EBITDA) or a strategic buyer (that may pay a higher price because of synergies and strategic fit).

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