Most of you may think the best deal structure is Contingent Consideration “Earnout” and for me one of the best is called ¨Equity Clawback¨.
A clawback gives one party the right to repurchase a certain amount of equity at a stated value if certain conditions are met.
In contrast to earnouts, a clawback works best when the Selling shareholder has a longer-term focus and prefers to make business decisions centered around shareholder appreciation as opposed maximizing cash proceeds in the near term. A clawback works in a similar way to an earnout but allows the Buyer to “clawback” equity retained by the Seller at close under certain scenarios.
Hope this helps to create smarter deal structures!