# What is earn-out?

Source: https://launch-rec.com/glossary/earn-out. Category: Ownership. Market: US and UK.

## Definition

Part of a sale price paid later, conditional on the business hitting agreed performance targets after completion.

## In practice

Recruitment acquisitions frequently pay 40% to 60% up front with the rest over two or three years against EBIT targets.

The detail that matters is who controls costs during the earn-out period. Shared overhead allocated by the buyer can wipe out a target you would otherwise have hit.

## Related terms

- https://launch-rec.com/glossary/equity-stake
- https://launch-rec.com/glossary/valuation-multiple