How igc negotiates earn-outs to protect the seller
Reading time
5 minutes
Date
Jul 13, 2026
Author
Murilo Oliveira — Partner, igc Partners
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An earn-out is a mechanism in which part of the sale price is not paid at closing, but in the future, conditioned on the company's performance over a defined period, usually one to three years. Instead of a single fixed amount, the seller receives an upfront portion and another that depends on the company reaching certain targets, such as revenue, EBITDA or another agreed indicator. It is a way of splitting, between the parties, the bet on the future of the business — and, like any bet, its terms matter.
The earn-out usually arises when there is a difference in expectations about future value. The seller believes the company will grow and wants to be paid for it; the buyer is cautious and does not want to pay today for a result that does not yet exist. The earn-out unlocks this impasse: the buyer pays more if the growth materializes, and less if it does not. In transactions with founders who remain in the business, it also serves to align incentives during the transition.
The main risk is simple: part of the price may not materialize. If the targets are not met — whether due to performance, market changes or decisions by the new controlling owner — the seller receives less than the number that seemed to have been agreed. There is also the risk of conflict: after the sale, the one who controls the company is the buyer, and decisions about investment, costs or strategy can affect the result that defines the earn-out. That is why, in igc's view, the structure of an earn-out matters as much as the announced value.
A few points make all the difference, and it is on these that igc focuses the negotiation. The metric should be as objective and simple to measure as possible — indicators highly subject to interpretation or accounting maneuvers turn into disputes. The period needs to be realistic. And, above all, it is necessary to define the seller's degree of autonomy over management during the period, or clauses that protect the operation from buyer decisions that deliberately harm the result. Defining clearly how the company will be run during the earn-out period is as important as the number, and it is the kind of detail an experienced advisor does not let slip.
The more qualified buyers competing for the asset, the greater the seller's power to negotiate not only the price, but the form of payment, including the earn-out portion. In a competitive process, it is easier to seek more value upfront, reduce the conditional portion or obtain more favorable metrics and protections, because the buyer knows it is not the only interested party. That is why igc conducts every sale competitively: competition does not only improve the headline number, it improves the entire package.
It is, in itself, neither good nor bad — it depends on how it is structured and on the context. Well designed, it can raise the total price for those who believe in their own business and unlock a transaction that would not otherwise happen. Poorly designed, it turns part of the price into a promise that is hard to collect on and into a source of friction. The difference lies in the negotiated details, and that is where igc's experience protects the seller.
igc works exclusively on the sell-side and negotiates each earn-out with a single objective: that the seller receives the most possible with the least possible risk. This means seeking more value upfront when it makes sense, objective metrics and clear protections over management during the period, so that the conditional portion does not become value that never arrives.
This negotiation is led by the partners, owner to owner, with the experience of more than 500 deals and the bargaining power that comes from a competitive process. When there is more than one buyer at the table, it is easier to negotiate a better payment structure, including the earn-out portion.
Yes, but it is the part conditioned on future results. When comparing proposals, you need to consider the probability that the portion will materialize, not just the full announced amount.
You may receive less than expected if the targets are not met. That is why the metrics, the period and the protections over management during the period are so important to negotiate.
It varies by transaction and sector; there is no fixed standard. The relevant point is to negotiate the proportion and the structure so as to balance value and risk for the seller.
Yes, especially when there is a difference in expectations about future value or when the founder remains in the business. The key is to structure it with objective metrics and clear protections.
