If you are working with a company that is buying or selling a business, you may well come across the issue of earn-outs. These mechanisms are often used to financially tie in the seller of a business for a period after completion of the deal – generally one to three years – and to reward them for achieving target profit levels.

They can also help to ‘cushion’ the buyer who wants to avoid paying over the odds for the potential, but not yet realised, value of the business.