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Facilitator Guide

Earn-Outs and Purchase Price Adjustments

What’s covered

  • Purpose of purchase price adjustments 
  • Metrics used for purchase price adjustments 
  • Mechanics of purchase price adjustments
  • Purpose of earn-outs
  • Common earn-out milestones (financial and operational)
  • Drafting considerations 

Before the session

Prepare the Attendees

Send the attendees an invitation for the session. Include this link, which has the videos and exercise they’ll need to prepare.

https://www.hotshotlegal.com/discussions/earn-outs-and-purchase-price-adjustments/attendee

Prepare Yourself

Watch the videos and read the exercise so you’re familiar with the Hotshot material.

During the session

Part 1: Knowledge Check
 
Ask attendees these questions to ensure they understand the topic:

  • What are purchase price adjustments, what are earn-outs, and how do they differ?
  • How do these provisions mitigate risk?
  • How is a purchase price adjustment implemented? 
  • What kinds of milestones do earn-outs use?
  • When drafting these provisions, what do you need to keep in mind? Why?
 
Part 2: Group Exercise
 
Lead a group discussion based on the exercise. To encourage collaboration, divide the attendees into groups to discuss the exercise, then have a representative from each group summarize their views to the larger group. Call on people to share their thoughts and ask others to respond.
 
Tip for remote sessions: use your web conferencing system’s breakout room feature to divide people into groups.
 
Part 3: War Stories and Firm Specifics
 
Share your own experiences and guidance, including:
 
  • Anecdotes and war stories (e.g., about a near-disaster or a tough negotiation)
  • General practice tips (do’s and don’ts)
  • Firm-specific guidance and practices

After the session

To continue their learning, attendees can check out related courses in Hotshot’s M&A Basics topic.