There was a time when earnouts strutted through the M&A world like they owned the place. Smart. Stylish. Supposedly flattering for everyone. The perfect blend of buyer caution and seller optimism.
But just like skinny jeans, earnouts are no longer cutting it.
Buyers hate the post-deal handcuffs. Sellers dread the drama. Lawyers? They love them – because they’re the only ones who win when things go sideways. And they do go sideways. Often.
Let’s break it down.
The Earnout Once Ruled. Now It’s Just… Awkward.
On paper, earnouts seem like the ideal middle ground. A buyer says, “We’ll give you X now, and Y later – if the business keeps performing.” The seller nods. Everyone smiles. Champagne, LinkedIn announcement, maybe even a bottle of Petrus.
But beneath the clinking glasses is a ticking time bomb.
Earnouts delay the real transfer of ownership. Legally, you’ve sold. Practically, you’re still stuck. You can’t fully integrate the business. You can’t change the brand. You can’t shift strategy. Every decision triggers a nervous twitch from the other party.
In sectors like Marcomms, where speed is survival, that delay is toxic. Missed campaigns. Confused teams. Culture clash. And let’s not forget the late-night WhatsApps about “alignment” on adjusted EBITDA.
Nobody wants that.
Ownership Without Control – What Could Possibly Go Wrong?
This is where things get messy.
Imagine you’ve just bought a business. You’re excited to integrate, streamline, maybe replace the underwhelming CFO. But wait – the sellers are still lurking. Why? Because the next £2 million of their payout depends on hitting numbers they don’t fully control anymore.
Cue tension.
The buyer can’t make bold moves without looking like a villain. The seller starts sabotaging anything that looks like risk. Every strategic shift becomes a negotiation. “Let’s innovate” turns into “Let’s argue about revenue recognition.”
The deal becomes a sitcom. And no one’s laughing.
The Seller’s Hangover: When That “Win-Win” Turns Into a Wrestling Match
Let’s talk about seller regret.
At first, the earnout feels like a win: some cash now, more if things go well. But then come the surprise write-downs. The “necessary restructuring.” The sudden lack of marketing budget. And somehow, the earnout metrics become a moving target.
What began as a handshake becomes a spreadsheet-fuelled standoff.
You start to wonder if you sold your business or just leased it back to yourself – with performance conditions and no control. It’s exhausting. It’s emotional. And for many founders, it turns the biggest moment of their career into the most bitter.
We’ve seen founders walk away from millions because they couldn’t stomach two more years of boardroom purgatory.
Smarter Structures That Don’t Require a Second Therapist
Thankfully, the M&A world is evolving.
Enter the new generation of deal structures – cleaner, faster, smarter:
🟢 Minority Retentions or Buyer Shares
Instead of tying payments to performance metrics, sellers keep a stake – either in their own business or in the buyer. Incentives are aligned, no one’s second-guessing EBITDA, and both sides can move forward.
Bonus? If the acquirer scales like they promise, the seller wins again. A true second bite of the cherry.
🟢 Deferred Payments Based on Pre-Closing Performance
Tie final payment to trailing twelve months (TTM) before the deal closes. It’s still risk-sharing – but cleaner. No post-deal headaches, no control issues, and no “creative” accounting battles.
🟢 Earn-Ins, Not Earn-Outs
Flip the script. If a buyer wants the team to stay and grow the business, give them upside in the new entity. Sellers become growth partners, not performance prisoners.
These structures reward results without the courtroom drama. They’re faster to close, easier to manage, and – frankly – more respectful of everyone’s sanity.
Why These New Moves Actually Work
Let’s be blunt: most earnouts were designed by lawyers, not operators.
They’re built to protect against failure, not to enable success. They assume bad behaviour and plan for litigation.
Modern structures? They’re built on commercial alignment. They say: “Let’s win together, not hold each other hostage.”
Buyers get the integration freedom they need. Sellers get clarity, upside, and a cleaner path to closure. And deals actually create momentum – rather than kill it.
Still Clinging to Your Earnout? Read This Before You Sign.
Look, we’re not saying earnouts are evil. In certain situations – like pre-revenue startups or moonshot turnarounds – they might be the only way forward.
But if you’re selling a profitable, proven business with real brand equity, recurring revenue, and loyal clients? Then choosing an earnout might be the equivalent of selling your car and agreeing to keep driving it – on someone else’s insurance.
So, before you sign that earnout clause…
- Ask who controls the business post-deal
- Understand how performance is measured (and adjusted)
- Check whether disputes are mediated or escalated
- Ask yourself: If the buyer tanks this, do I lose twice?
And if you feel even 10% queasy reading that clause – walk. Or better yet, restructure.
What We’d Tell Our Best Mate (If They Were Selling)
We get it. The money’s on the table. The champagne’s in the fridge. Everyone’s saying it’s “market standard.”
But here’s what we’d say over a pint:
You didn’t build your business to spend the next two years proving its worth to someone who’s already bought it.
There’s a better way. And if the buyer won’t bend? Maybe they’re not the buyer you need.
At M&A Advisory, we’ve restructured dozens of deals mid-negotiation – shifting earnouts into equity, deferrals, or hybrid structures that work with both parties, not against them.
We’ve sat in rooms where sellers were ready to walk – until we reshaped the deal to preserve their legacy, sanity, and upside.
This isn’t theory. It’s what we do.
The Exit Doesn’t Have to Be the End of the Story
A clean exit doesn’t mean a hard goodbye.
Whether you want to stay involved, take chips off the table, or prep for your next move – we help founders shape deals that enable freedom, not restrict it.
Our team advises across the full lifecycle:
- Pre-sale readiness – so you know your worth
- Deal strategy – so you don’t leave money (or control) on the table
- Post-transaction guidance – so your team, brand, and legacy land softly
You deserve more than a clever deal. You deserve a smart one.
Before You Sign That Earnout… Let’s Talk.
If your advisor is still pushing standard earnouts as “just how deals are done,” it might be time to talk to someone who’s seen the mess that follows.
We help creative, digital, and Marcomms founders exit with clarity, confidence, and no unnecessary baggage.
✅ Cleaner structures
✅ Aligned incentives
✅ Less post-deal friction
✅ More value, more peace of mind
Ready to make your exit feel like a win – not a warning?
Schedule a confidential chat with M&A Advisory today.
FAQs: Earnouts and Modern Deal Structures
What is an earnout in M&A?
An earnout is a deal structure where part of the purchase price is paid later—if the business hits certain performance targets post-sale. It sounds fair, but often creates control issues and post-deal friction.
Why are earnouts falling out of favour?
They delay integration, create legal grey areas, and often turn collaborative deals into hostile standoffs. Buyers want freedom. Sellers want clarity. Earnouts give neither.
What are better alternatives to earnouts?
Minority retentions, buyer shares, or deferred payments based on pre-closing performance offer cleaner exits and aligned incentives—without the emotional baggage.
Do earnouts ever make sense?
Occasionally. If the future performance is wildly uncertain or tied to new IP launches, they can work—but only with crystal-clear terms and control boundaries.
How can I avoid earnout regrets when selling my business?
Get expert structuring advice early. Stress-test the deal terms. Ask who controls what. If it feels like a trap, it probably is.
