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Figure 7From “What is an earn-out? The part of the price that waits for proof”

An earn-out stress test for one measured target

Ask of each earn-out tranche who controls the number, what it pays under plain growth, and what the integration plan does to it.

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Figure 7An earn-out stress test for one measured target

An earn-out worksheet with six columns for one measured target: the performance measure and who controls its inputs after closing, the threshold above last year and the cap, the expected payment under plain growth against the headline price, the integration step that would merge the measured unit, the exit events, and how disputes are decided.MeasureSales, profit ormilestone? Whosets its inputsafter closing?ThresholdHow far abovelast year? Whereis the cap?ExpectedPayment underplain growth,against theheadline price?IntegrationWhich plannedstep merges themeasured unit?Exit eventsManager leaves,unit sold, buyeracquired?DisputesPolicies writtendown? Whodecides?A clause that cannot answer one of these columns before signing is likely to be answered after closing, by negotiationor arbitration.An earn-out worksheet with six columns for one measured target: the performance measure and who controls its inputs after closing, the threshold above last year and the cap, the expected payment under plain growth against the headline price, the integration step that would merge the measured unit, the exit events, and how disputes are decided.MeasureSales, profit or milestone? Who setsits inputs after closing?ThresholdHow far above last year? Where is thecap?ExpectedPayment under plain growth, against theheadline price?IntegrationWhich planned step merges the measuredunit?Exit eventsManager leaves, unit sold, buyeracquired?DisputesPolicies written down? Who decides?A clause that cannot answer one ofthese columns before signing is likelyto be answered after closing, bynegotiation or arbitration.

Source: Author's decision worksheet. The questions follow the failure points reported by Datar et al. (2001), pp. 203, 207 to 209 and 232 to 235, Cain et al. (2011), pp. 155, 161 and 163 to 165, and Kohers and Ang (2000), pp. 467 to 471. Their combination into a pre-signing test is this essay's and has not been tested. The fields are reader inputs; no deal data is supplied.

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  • B A verified against the printed page of the primary sourceB primary source, text layer onlyC authoritative secondaryD reported The stress test: the invented software unit (10 million revenue; 14 million at closing; up to 6 million at 1 million per million of second-year revenue above 11 million, capped at 17 million; headline price 20 million; 10% growth gives 12.1 million revenue, 1.1 million paid, 15.1 million total; the cap needs 70% growth; the sales team moved in month four, so revenue depends on which salesperson books which deal) the decision field (who controls the measure's inputs after closing against when integration merges the unit, with four responses: measurable, contestable, overlap, both) and the six-column worksheet with its three repairs; untested, no deal data.Author synthesis

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APA 7

Isoglu, S. (2026). An earn-out stress test for one measured target [Figure]. isoglu.com. https://isoglu.com/insights/exhibits/isoglu-2026-what-is-an-earn-out-fig07/

BibTeX
@misc{isoglu-2026-what-is-an-earn-out-fig07,
  author = {Isoglu, Sinan},
  title = {{An earn-out stress test for one measured target}},
  year = {2026},
  howpublished = {Figure 7, isoglu.com},
  url = {https://isoglu.com/insights/exhibits/isoglu-2026-what-is-an-earn-out-fig07/},
  note = {From the essay {What is an earn-out? The part of the price that waits for proof}}
}
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<figure>
  <a href="https://isoglu.com/insights/exhibits/isoglu-2026-what-is-an-earn-out-fig07/">
    <img src="https://isoglu.com/social/isoglu-2026-what-is-an-earn-out-fig07.png" alt="Figure 7: An earn-out stress test for one measured target" width="3200" height="2400">
  </a>
  <figcaption>Figure 7: An earn-out stress test for one measured target. Source: Author&#39;s decision worksheet. The questions follow the failure points reported by Datar et al. (2001), pp. 203, 207 to 209 and 232 to 235, Cain et al. (2011), pp. 155, 161 and 163 to 165, and Kohers and Ang (2000), pp. 467 to 471. Their combination into a pre-signing test is this essay&#39;s and has not been tested. The fields are reader inputs; no deal data is supplied. <a href="https://isoglu.com/insights/exhibits/isoglu-2026-what-is-an-earn-out-fig07/">View exhibit</a>.</figcaption>
</figure>

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