How it works in a data room
During diligence, buyer and seller rely on the room to agree a baseline for the earn-out metrics. Historical accounts, the quality of earnings report and management forecasts all sit in the room, and the definitions in the agreement often refer back to them. After closing, some parties keep a smaller shared room or folder open where the buyer posts periodic calculations and supporting data so the seller can check them.
Why it matters in a deal
Earn-outs bridge a gap in valuation: the seller believes in strong growth, the buyer wants proof. They are common in founder-led businesses, life sciences milestones and technology acquisitions. They are also a frequent source of disputes, because the buyer controls the business after closing and its decisions affect the numbers. Clear definitions, accounting policies and information rights reduce that risk. Tax and accounting treatment varies by country; this entry is general information only.
Example
A US healthcare services group buys a physiotherapy chain for an upfront payment plus an earn-out tied to EBITDA over the next two years. The agreement uses accounting policies documented in the room’s finance folder. Each quarter, the buyer uploads management accounts to a shared folder for the sellers’ accountant to review. In year two, the parties disagree about whether integration costs should be excluded and resolve it using the definitions they agreed at signing. See our post-merger integration checklist for related planning.