Earn-out simulator
This simulator models contingent payment based on target EBITDA achievement, with a minimum threshold and comparable scenarios in one table.
Agreement parameters
Model the contingent tranche: earn-out pool, EBITDA target, measurement period and minimum achievement threshold.
EBITDA scenarios
Enter projected EBITDA for each scenario to compare contingent payouts.
Results
| Scenario | EBITDA (MXN) | Achievement % | Earn-out payout (MXN) | Status |
|---|---|---|---|---|
| Below target | MX$0.00 | 0.0% | MX$0.00 | Below threshold |
| At target | MX$0.00 | 0.0% | MX$0.00 | Below threshold |
| Above target | MX$0.00 | 0.0% | MX$0.00 | Below threshold |
At target EBITDA you receive a pro-rata earn-out; structure the LOI so the threshold and measurement period match operational risk.
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Earn-out amount: MX$3,000,000.00 · Target EBITDA: MX$5,000,000.00 · Period: 2 yr · Threshold: 80.0%
| Scenario | Payout |
|---|---|
| Below target | MX$0.00 |
| At target | MX$0.00 |
| Above target | MX$0.00 |
At target EBITDA you receive a pro-rata earn-out; structure the LOI so the threshold and measurement period match operational risk.
How to interpret the results?
Earn-out payout is pro-rata to target achievement when the minimum threshold is met; below threshold, payout is zero. A below-target scenario shows how much operational risk the seller retains; an above-target scenario confirms whether the full pool is earned. The measurement period defines when reference EBITDA is calculated.
In practice, earn-out is negotiated together with accounting definitions, permitted adjustments and dispute mechanisms. This simulator isolates the contingent tranche math so you can discuss structure with your advisor before the LOI.
What other tools and guides to review?
Earn-out transfers post-close operational risk; structure must be explicit in the LOI. To see how it fits in total consideration, see the earn-out term and the consideration structure simulator.