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Peter Ferrari on Preventing Earnout Problems

Written on Friday, January 11th, 2013

Guild Yule corporate lawyer Peter Ferrari recently published an article on Divestopedia, a website for "for entrepreneurs who want to sell their business for the best price and terms." In Earnouts or Burnouts - Don't Get Burned on an Earnout, Ferrari explains that "earnouts are difficult legal clauses to manage and can often lead to misunderstanding and difficulty realizing them."

He establishes a scenario where the seller could be burned, and offers specific examples of types of post-closing covenants to include in the share purchase agreements, and suggests drafting the earnout as a "reverse earnout" to avoid potential problems. The full article is available on Divestopedia.

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