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How to Track an Earnout Indemnity Set-Off
How to track an earnout indemnity set-off is a ledger for whether the buyer may reduce an earnout payment by an indemnity claim, not the earnout metric/period/paid ledger and not the operating-covenant tab. For each signed deal, log whether an earnout is present or silent, whether a setoff right is present, silent, or expressly excluded, how setoff interacts with escrow, which pending indemnity claims could reduce the next earnout, the pointer to earnout-tracking, the pointer to earnout-operating-covenant-tracking, and status. Raziel's earnout tracking page is the metric, period, and paid ledger. This page is the earnout indemnity set-off.
This is not legal, tax, insurance, or investment advice. Raziel does not provide it. Copy the setoff sentence from the PDF. Do not invent a 2025 indemnity-setoff percentage when Goulston's 2025 overview and Business Law Today December 2025 do not print one, and do not write a 26% to 18% earnout-presence trend as if setoff were declining.
What this ledger is (and is not)
An earnout indemnity set-off is a sentence that lets the buyer reduce an earnout payment by an indemnity claim against the seller. Goulston and Storrs, What's Market: Earnout Provisions (May 29, 2024), recapping the ABA Private Target Studies (2023 sample: 108 deals, $30 million to $750 million), prints that more than one-half of earnouts in the ABA studies included an indemnity setoff right. The same recap prints earnouts in 26% of deals in the 2023 study (range of the previous eight studies 19-38%). Keep metric (approximately 50%-70% EBITDA or revenue), operating covenants (30% or less), and change-in-control acceleration (less than one-third) as pointers, not as this page's headline. The headline on this row is the setoff right. Business Law Today (December 16, 2025) prints earnout use down from 26% (2023 Study) to 18% (2025 Study). Label 18% as ABA 2025 presence, not as a 2025 setoff percentage. Goulston May 6, 2026 and BLT / K&L December recaps do not print a 2025 indemnity-setoff percentage. Do not invent one, and do not write 26% to 18% as if setoff were declining. DealLawyers (April 2026) recapping SRS Acquiom 2026: 24% of 2025 deals included an earnout (excluding Life Sciences), versus 22% in 2024. Fasken (May 7, 2026) recapping the same SRS study (more than 2,300 transactions, 2020 through 2025): 24% of deals, 33% in 2023, 22% in 2024, historic average roughly 20%. Label SRS separately from ABA. Do not blend ABA 18% with SRS 24%. Those are study snapshots. Your earnout article and indemnification article control.
This ledger is not earnout-tracking (metric, period, and whether it was paid), not earnout-operating-covenant-tracking (past practice / maximize), and not set-off-insurance-proceeds-tracking (insurance no-windfall). Book metric, operating covenant, and insurance as overlay pointers, not as a rewrite of this setoff row.
Seven columns on one row
Open one row per signed deal. Attach the earnout article, the indemnification article, and pointers to earnout-tracking and earnout-operating-covenant-tracking.
Earnout present or silent. Presence pointer. ABA 2025 (BLT) 18% from ABA 2023 26% (Goulston range of previous eight studies 19-38%). SRS 2026 (DealLawyers): 24% of 2025 deals excluding Life Sciences versus 22% in 2024. Fasken: 24%, 33% in 2023, historic average roughly 20%. Label ABA and SRS separately. Copy presence from your PDF.
Setoff right present, silent, or expressly excluded. Goulston recapping ABA studies: more than one-half of earnouts included an indemnity setoff right. Goulston May 6, 2026 and BLT December 2025 do not print a 2025 setoff percentage. Do not invent one. Copy the signed sentence.
Setoff versus escrow interaction copied. Goulston notes a seller may argue the earnout is a holdback and the indemnity escrow should shrink, while a buyer points to the contingent nature of the earnout. Copy how the PDF treats setoff versus escrow. Do not invent a Study percentage for this limb.
Pending indemnity claims that could reduce the next earnout. Copy claim notices, amounts, and which earnout installment they could hit. A silent setoff paper is not a 50% paper.
Pointer to earnout-tracking. Pointer only. That page owns metric, period, and paid. Goulston: approximately 50%-70% of earnout provisions use EBITDA or revenue as the principal metric. Keep that print there. Mark the pointer. Do not rewrite that page.
Pointer to earnout-operating-covenant-tracking. Pointer only. Goulston: operating covenants (past practice / maximize) in 30% or less; less than one-third of earnouts expressly accelerate upon a change in control. Keep those prints on the operating-covenant page. Mark the pointer. Do not rewrite that page.
Status. Copied, earnout running, indemnity noticed, setoff asserted, disputed, netted, paid, or closed. When a setoff is taken, book the date and the installment it hit.
Copy the clause, not the study percentage
Do not paste 'more than one-half' onto a silent setoff paper. Do not invent a 2025 indemnity-setoff percentage. Do not write 26% to 18% as if setoff were declining. Do not blend ABA 18% with SRS 24% into one series. Metric and period live on earnout-tracking. Past practice / maximize live on the operating-covenant page. This row is whether the buyer may reduce an earnout payment by an indemnity claim.
When an earnout installment comes due, log whether a setoff sentence sat in the PDF, which indemnity claims were pending, and whether escrow was supposed to soak first. That trail is what earnout counsel will ask for first.
When the ledger holds
The row holds if the seven cells are copied from the PDFs (or marked missing). It fails when you invent a setoff right, invent a 2025 setoff percentage, treat 26% to 18% as a setoff trend, blend ABA 18% with SRS 24%, or treat the earnout-metric tab as if it answered the setoff question. Raziel's alternative asset dashboard is where the setoff sentence, pending indemnity claims, and the next earnout installment should sit together. Raziel does not decide your setoff dispute. Copy the seven columns.
