What is an earnout, and why would a buyer offer one?

• An upfront cash bonus the seller pays the buyer at closing, used to sweeten the terms and get the deal over the line
• A contingent payment tied to future performance; it bridges a valuation gap, de-risks the buyer, and motivates the seller
• A price discount the seller offers the buyer in exchange for agreeing to close the transaction on an accelerated timeline
• The success fee paid to the bankers once the deal closes
• A mandatory debt tranche that every acquisition is required to include in order to fund the purchase price