Earn out and Sources and Uses
I'm curious if anyone knows how to treat an earn-out on the sources and uses. The company has an EV of $100mm, but only $50mm of it is being paid upfront (all with debt including transaction costs) with the rest paid over time based on performance. Would this impact sources and uses at all?
It makes sense to me that it would if we treated it like an additional loan or like seller financing. My guess is it could look like this:
sources:
debt (upfront fee)- $51mm
seller financing - $50mm
Total sources: $101mm
Uses:
Seller proceeds: $50mm
Earn-out liability: $50mm
transaction costs: $1mm
Total Uses: $101mm
I could be totally wrong though. Anyone have some insight?
Thanks
What’s this for?
Just curious honestly
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