Ideas on Closing the Price Gap

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    Nick Picone

    Looking for ideas on how to close the price gap on a small acquisition between what you are willing to pay and what the seller thinks that it is worth?

    We have traditionally used earn-out based on the future years EBITDA but have many issues during negotiation and future years payout. During negotiation, much discussion about how it will be calculated and the baseline EBITDA. There are concerns of authorization to make decisions and concerns about corporate cost structure on the acquisition impacting the EBITDA.

    Any other creative solutions?



    I have always stayed away from earn-outs on EBITDA for the reasons that you highlight and instead have based earn-outs on revenue. In some cases, we provided for an annual minimum payment to protect the seller from general economic conditions greatly diminishing the payout and getting them more comfortable with a “worst case” scenario.

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