06. Earnouts: The Deal After the Deal

This podcast uses AI-assisted writing and AI-generated audio; see the production note below and at www.repsandremedies.com.A $15 million earnout can evaporate even when the product is performing. This episode examines how contingent consideration shifts risk after closing in a founder sale of a cybersecurity SaaS company to a PE buyer planning immediate integration. The conversation breaks the earnout into four bargains — price, operating behavior, measurement, and payment security — and shows how metric choice between ARR, revenue, EBITDA, and bookings creates different manipulation risks. It also covers bundling and attribution rules, dedicated-sales-team and anti-diversion covenants, the Delaware implied-covenant backdrop for earnout fights, accounting hierarchy and deferred-revenue distortions, change-of-control acceleration, credit support, and the point at which an earnout is so synthetic that rollover equity, retention arrangements, or no earnout may be the cleaner answer.Production disclosure:This podcast is for informational and educational purposes only. It is not legal advice, does not create an attorney-client relationship, and is not a substitute for advice from counsel licensed in your jurisdiction. Law and deal practice change, and information may become outdated. No confidential client, deal, or matter information is discussed. The views expressed are the author’s alone and do not reflect the views of the author’s firm or its clients.This podcast includes AI-assisted writing and AI-generated audio. The underlying instructional modules were developed with substantial assistance from OpenAI GPT-5.4, reviewed and refined with input from Anthropic Claude Opus 4.6, and further synthesized into audio by Google NotebookLM. Final topic selection, source curation, and editorial judgment remain with the creator. Some episodes may retain occasional stylistic or tonal artifacts from AI-assisted production.