Drafting earn-out agreements manually requires hours of careful attention to payment formulas, operational covenants, and dispute resolution mechanisms—all while ensuring consistency with the main purchase agreement. Corporate attorneys spend 4-6 hours navigating complex EBITDA calculations, negotiating business conduct provisions, and drafting acceleration clauses that protect both parties. The risk of inconsistent definitions or misaligned payment schedules can derail deals or create costly disputes.
Drafting earn-out agreements requires balancing complex financial calculations, operational controls, and dispute resolution mechanisms while protecting both parties' interests. Manual drafting takes 6-10 hours and risks inconsistencies between the earn-out terms and the main purchase agreement, potentially leading to costly disputes over contingent payments.
CaseMark automatically generates comprehensive, legally sound earn-out agreements tailored to your M&A transaction. Our AI analyzes your purchase agreement and deal terms to draft precise calculation methodologies, balanced operational covenants, robust verification procedures, and clear dispute resolution mechanisms in minutes.
This workflow is applicable across multiple practice areas and use cases
Private equity firms frequently structure earn-out provisions in portfolio company acquisitions to bridge valuation gaps and align seller incentives with post-closing performance.
PE transactions commonly use contingent consideration mechanisms, and the workflow's EBITDA-based calculations and operational covenants are standard in PE deal structures.
Asset purchase agreements often include earn-out provisions to defer payment based on the acquired assets' future performance, requiring detailed payment calculation methodologies.
Earn-outs are common in asset purchases where buyers want to tie consideration to post-closing results, making this workflow directly applicable to asset deal documentation.
Corporate finance transactions involving business combinations or divestitures use earn-out structures to manage valuation uncertainty and align payment with financial performance metrics.
The workflow's financial calculation features and payment schedules are essential tools for corporate finance attorneys structuring contingent consideration in various corporate transactions.
Franchise acquisitions and multi-unit territory sales sometimes incorporate earn-out provisions tied to revenue or EBITDA targets to structure deferred payments based on franchise performance.
While less common than M&A, franchise transactions occasionally use contingent payment structures, particularly in larger franchise system acquisitions where performance-based consideration is negotiated.
Upload your purchase agreement and CaseMark will extract party information, deal structure, and closing terms. You'll specify the earn-out period, performance metrics (EBITDA, revenue, etc.), payment targets or formulas, and any special operational requirements. The AI will draft comprehensive provisions around these parameters, including calculation methodologies, verification rights, and dispute resolution procedures.
CaseMark drafts detailed calculation methodologies including tiered structures, sliding scales, thresholds, and caps. The AI defines the financial metric with precision, specifies GAAP adjustments and exclusions, addresses extraordinary items, and provides worked examples. You can customize whether payments are binary, linear, or formula-based across single or multiple measurement periods.
Yes, CaseMark includes comprehensive operational covenants requiring the buyer to operate the business consistent with past practice and prohibiting actions intended to reduce earn-out payments. The AI drafts provisions addressing staffing levels, overhead allocations, customer transfers, and material business decisions, with appropriate consent or notice requirements balancing buyer control and seller protection.
The agreement includes a multi-tiered process: initial good-faith negotiation between the parties, followed by submission of unresolved items to an independent accounting firm for binding determination. CaseMark drafts detailed procedures for objections to earn-out statements, selection of the accounting firm, scope of review, timing requirements, and cost allocation based on which party prevails.
CaseMark includes comprehensive provisions addressing extraordinary events during the earn-out period. The AI drafts acceleration clauses, assumption requirements, and security provisions triggered by change of control, business disposition, or material changes. You can customize whether acceleration is mandatory, optional, or based on present value calculations of expected future payments.