How to Track an Earnout After the Purchase Agreement

How to track an earnout is a contingent-price ledger after close, not the indemnity escrow. For each earnout, log the metric copied from the purchase agreement, the measurement period, the target (and cap, if any), the buyer statement (date and amount), whether it was paid, and whether a dispute is open. Raziel's escrow holdback tracking page is cash withheld at close for claims. This page is additional consideration that is due only if a milestone or formula hits.

This is not legal, tax, or investment advice. Raziel does not provide it. Copy the signed purchase agreement. Do not invent a two-year industry clock.

What this contingent-price ledger is (and is not)

Cooley LLP (Michael McMahon, Tijana Brien, and Bobby Earles, June 21, 2024, originally in Law360) describes an earnout as additional consideration the buyer agrees to pay after closing if certain milestones or requirements are achieved, often used to bridge a valuation gap. Davis Wright Tremaine (Andrew J. Schultheis and Dylan Lowe, June 18, 2026) uses the same frame: a portion of the purchase price tied to future performance after closing. Cooley quotes Vice Chancellor J. Travis Laster in Airborne Health, Inc. v. Squid Soap, LP, 984 A.2d 126, 132 (Del. Ch. 2009): an earn-out often converts today's disagreement over price into tomorrow's litigation over the outcome. An escrow holdback is a different row. Do not merge them.

Six columns on one earnout row

Open one row per purchase agreement per earnout (or per measurement period if the paper pays in annual gates). Attach the earnout schedule and any illustrative worksheet.

• Metric copied. Cooley: set clear metrics that can be objectively measured, including EBITDA or net revenue targets, sales targets, regulatory approvals, study or clinical trial completion, and append an illustrative calculation. DWT (June 18, 2026): common financial metrics include general revenue, gross income, and net operating income; non-financial milestones commonly include FDA approval, patent issuance, or a product launch. Copy the defined term and the accounting standard the agreement freezes (for example GAAP applied consistently with a named historical practice). Store silent if the worksheet is missing.

• Measurement period. DWT: the earnout period typically begins at closing and commonly ranges from one to three years. That range is commentary, not this deal. Copy start date, end date, and whether payment is binary, tiered, or scaled. Copy any cap and any floor below which nothing is owed.

• Target (and cap, if any). The number or milestone the formula needs. If the paper uses more than one metric, one row per metric or a parent row plus child rows. Cooley (citing the SRS Acquiom 2024 M&A Deal Terms Study) reported that 33% of analyzed deals included earnouts in the 2023 slice, up from 21% in 2022 and 18% in 2021. Prevalence is not your target.

• Buyer statement (date and amount). DWT: the buyer typically needs time after each measurement period to calculate the earnout (60 to 90 days is described as common) and should have a deadline to deliver the calculation. Copy the contractual deadline, the date the statement arrived, and the amount the buyer printed. If no statement has arrived, store missing and the deadline.

• Paid (yes / no, amount, form). Cash, buyer stock, a promissory note, or a mix, as DWT lists. Copy dollars (or share count) actually received and the payment date. Zero if the gate was missed and no catch-up remains.

• Dispute (yes / no). Cooley: spell out timing for dispute resolution, what triggers escalation, and whether an independent accountant sits as expert and not as arbitrator (citing Menn v. ConMed Corp., 2022, on undefined "commercial best efforts," and Bus Air, LLC v. Woods, 2022, on an unclear agreement to arbitrate). DWT describes a typical path: buyer statement, seller review period (usually 30 to 60 days) with access to records, written objection, a negotiation period (typically 30 days), then a neutral accountant limited to the items in dispute. Copy your clocks. Do not paste 30 or 90 days as a default.

Copy the signed formula, not a blog default

Do not paste one to three years, 60 to 90 days, or 33% of deals as this agreement. Those figures are commentary or a cited study year. The signed schedule is the metric, the period, and the statement deadline. If the paper has an operating covenant or an acceleration event (buyer sale of the business, material breach, or a calculation that becomes impossible), log that covenant on the same row. It is still not an escrow holdback.

When the ledger holds

The row holds if the six cells are copied from the PDF (or marked missing). It fails when you invent a two-year statutory earnout, treat the indemnity escrow as contingent purchase price, or book a buyer statement you have not received as paid. Raziel's MOIC calculator is only honest if contingent price is dated when cash (or stock) actually moves. Raziel's alternative-asset book is the record those purchase agreements should sit on: documents, dates, IRR and MOIC. Raziel does not interpret your purchase agreement. Copy the six columns.