Mergers and acquisitions expert

Equity Clawback Explained

By Sebastian Amieva

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!

Sebastian Amieva 

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