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Earn-Outs — Where Are We?

Elizabeth Robertson and Richard Holme Creaseys Tunbridge Wells highlight the problems of earn-outs for the OMB sector
Finance Act 2003 has added more complexity to the taxation of earn-outs which continue nevertheless to be popular in the current economic climate.
Although some OMB vendors are offered consideration for their shares entirely in cash the majority of the deals we see in practice involve at least an element of earn-out and sometimes there is no 'up-front' cash consideration at all. The commercial rationale varies but to quote a recent view from Meta Corporate Finance:
'Whilst corporate financiers tend to present businesses for sale on a cash at completion basis only the reality is that vendors want to sell on next year's...

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