Case Study: Sonoran Scanners V. PerkinElmer

Law360, New York (September 17, 2010, 5:13 PM EDT) -- Future payments to a seller based on a company’s post-acquisition performance, known as “earnouts,” have long been used to strike a successful deal, especially in the midst of a declining or distressed economy, or when the business’s earnings are unproven.

In a typical earnout, payment of a portion of the overall purchase price is contingent on the target company achieving certain performance criteria following closing. Such criteria are negotiated so that the purchaser and the seller are comfortable that they will achieve their desired results based...
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