DealLawyers.com Blog

SRS/Acquiom recently published a snapshot of earnout trends for 2025 transactions. Here are some of the highlights:

– Earnout use continues to increase as valuation gaps persist and buyer behavior evolves. While historical norms have been closer to 15%, earnouts appear in 24% of 2025 deals (excluding life sciences), more than 75% of 2025 biotechnology/pharmaceutical transactions, and have increased in prevalence among other private-target M&A sectors, including technology, energy, and manufacturing.

– Historically, deals involving private equity buyers or technology targets have been less likely to include earnouts. In 2025, however, both categories saw modest increases. Earnout use in VC-backed exits has varied over time and generally remains at or above the rate for all non-life sciences deals. In recent years, VC-backed technology exits have included fewer earnouts, consistent with market demand for earlystage AI and blockchain companies.

– Lower middle-market deals with upfront payments of $50 million or less—especially those of $25 million or less—are more likely to include earnouts tied to a larger share of total transaction value. LMM deals see lower earnout achievement rates as well, with a median of 43 cents on the dollar for those LMM deals with any level of earnout achievement. Larger deals, with upfront payments exceeding $50 million and any level of success on the earnout, saw a materially higher 67 cents on the dollar paid.

SRS/Acquiom found that most earnouts achieve at least some level of success, with sellers typically receiving about 50 cents on the dollar in deals where earnouts are paid. However, that’s strongly influenced by deal size and target industry, and overall, sellers receive approximately one in five potential earnout dollars across all transactions with potential earnouts.

– John Jenkins