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Earn-Outs

Tuesday, November 29th, 2011 – running time 08:56

Successful entrepreneur and CEO, Jay Adelson, demystifies the start-up process by providing advice, tips, and answering questions. In this episode, Jay explains many of the elements that are negotiated in a merger or acquisition deal. It's not always a straight cash or even straight stock deal. Often times there are earn-outs and holdback provisions. This episode explains what they all are and mean along with how to weigh your options (pun kinda intended).

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Today's Homework Assignment

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06:31
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Jay's Chalkboard Notes:

- Company value = cash value offered

- Earn-outs and holdback provisions are a separate number

- Sometimes performance after M&A deal provides extra $

- Lately, "earn-out" provisions less popular

- Many tech acquisitions are talent grabs

- Hold back provision requires key talent to stay on the company

- Fully vested stock converts to cash

- Options aren't necessarily cash payout

Today's Homework Assignment

Weighing your options in an M&A negotiation:

- Do you want to remain at the company?

- Fully understand requirements for cash or milestones

06:31

Play

Have questions about launching a business that you want answered? Submit them to askjay@revision3.com, or upload a video question on our YouTube page. And make sure and follow Jay via Twitter.

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