Series 79 practice questioneasyEarnouts
Which of the following is a typical metric used to measure performance for an earnout?
- AStock price of the acquirer
- BRevenue or EBITDA of the target post-closing✓ Correct answer
- CMarket capitalization of the parent
- DSEC approval of Schedule TO
Explanation
Why B — Revenue or EBITDA of the target post-closing
Earnouts are commonly based on financial metrics like revenue or EBITDA of the acquired business after closing. The trap is to think unrelated company or market metrics are used.
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