Earnouts: Everything You Need to Know

Data, Realities, and Practical Advice on Earnouts in M&A Transactions

At some point in almost every sale process, the buyer puts a number on the table and says:

“The rest, if these targets are met.”

And then entrepreneurs ask me:

Is it normal to have an earnout in my deal?
What percentage of the price is usually variable?
Do you really end up getting paid?

What I can share is our direct experience. Of course, it is closely tied to the type of transactions we handle at Bondo M&A Advisors: middle-market deals with company valuations between €10M and €50M, in software, hardware, tech, digital media, and tech-enabled businesses, primarily in Southern Europe with international buyers.

In our case, almost all the deals we advise on include some variable component (so it’s completely normal).

The size of the earnout depends heavily on the transaction, but typically it ranges between 15% and 30% of the total price.

Regarding how many are actually paid, in the deals we’ve negotiated, most do pay something. Partly because at Bondo Advisors we put a lot of effort into negotiating reasonable earnouts, with KPIs where at least part is realistically achievable—unless everything goes very badly. But yes, there are cases where the earnout is not paid, and many where only part is achieved.

This reflects our vertical and the 24 deals we have advised on in our 6 years of activity, so it is clearly a non-representative sample.

To provide a broader perspective, I looked at serious studies covering the general market. Many focus on the U.S., though some include European data.

Here’s what they say:

1. Percentage of deals with earnouts

Europe (SMEs): 39%
U.S. (private market): 22–26%

In the U.S., various studies consistently show that 20–26% of private acquisitions include an earnout. The ABA Private Target M&A Deal Points Study puts the historical average at 20–28%, and the most recent Harvard Law / SRS Acquiom 2025 analysis confirms 22% as the current figure. In Europe, the number is significantly higher: 39% of SME transactions include earnouts according to Dealsuite, cited in PitchBook (2025).

2. Typical duration

Median: 24 months
Usual range: 1–3 years

There is strong consensus across studies. Median duration is 24 months (ABA Deal Points Study, SRS Acquiom 2025, Kroll 2024), with 1–3 years as the typical range. Recent trends point toward shorter periods; in 2024, almost no deals outside very specific sectors exceeded 4 years.

3. Size of earnout as % of price

Median global: 31% of closing price (2024)
Typical range in tech middle-market: 10–25%

Studies converge on a 30–34% range of the closing price. SRS Acquiom 2025 reports a median of 31% for 2024, peaking at 34% in 2023. For middle-market tech companies, RSM US (2024) cites an operational range of 10–25% of the purchase price—similar to what we see in Southern Europe for tech deals.

4. How much is actually paid?

41% pay nothing
59% pay something, partially or fully
21 cents per euro on average

This is crucial for sellers. According to the SRS Acquiom 2024 M&A Claims Insights Report, 41% of earnouts pay nothing. Only 59% pay something, and of those, 17% required renegotiation to avoid disputes or arbitration. Aggregated, earnouts pay an average of 21 cents per committed euro, and of deals that pay something, the average payment is about half of the maximum possible.

5. Differences by sector

Tech: fastest-growing use of earnouts, preferred metric is Revenue or ARR
Retail/traditional sectors: less common, usually based on EBITDA

Tech earnouts have grown significantly, especially in the middle market. High growth volatility and intangible assets like IP or customer data make clean valuation at closing difficult, so ARR or revenue is preferred over EBITDA. In retail and other traditional sectors, earnouts are less frequent and usually based on EBITDA or net profit.

6. Differences by company size

Deals under $100M EV: most likely to include earnouts
Megadeals above $750M: rarely use earnouts
Public companies: earnouts in only 1% of deals

Large deals are less likely to include earnouts. In 2024, megadeals surged because sellers could demand full payment at closing (SRS Acquiom 2025). Private deals under $100M are most likely to have earnouts. Public company acquisitions only include them in 1% of cases, versus 14–26% in private deals, where information asymmetry is much higher (Wall Street Prep).

7. Most used metrics

62–64% use Revenue as the main metric
22–23% use EBITDA
68% include multiple metrics simultaneously

62–64% of earnouts use revenue as the main metric, and 22–23% use EBITDA (SRS Acquiom 2024/2025, White & Case 2025). 68% include multiple metrics. The trend is moving away from EBITDA alone, which leaves room for accounting interpretation and is a common cause of disputes.

8. Disputes and litigation

28% of earnouts are formally disputed
17% require renegotiation to avoid litigation

Earnouts are one of the main sources of post-closing conflict in M&A. Ambiguity in metric definitions, specifically what is included or excluded in revenue or EBITDA, is the most frequent cause of dispute.

Practical insights from experience

After 24 transactions in six years, a well-negotiated earnout can be an excellent tool to close valuation gaps and give the buyer confidence that the seller will remain engaged post-sale. But they must be negotiated carefully.

Key tips:

Structure matters more than the amount. Linear models with a floor and ceiling are preferable: e.g., reaching 75% of the target pays 75% of the earnout, 90% of the target pays 90%. “All-or-nothing” models are risky and should be avoided.
Metrics must be clearly defined. ARR is not ARR, EBITDA is not EBITDA until exactly defined. Ensure you have contractual operational control to influence results.
Upfront price must already feel fair. The earnout should be a bonus, not a lifeline—ensure the immediate sale amount satisfies you.
Hire a skilled M&A advisor. Negotiating earnouts well increases the chances of actually receiving payment.

By Joshua Novick, Partner atBondo Advisors