Ex-Shopify CFO: “Earnouts = Valuation Disagreements”

Name: Ex-Shopify CFO: “Earnouts = Valuation Disagreements”
Uploaded: 2025-09-30T02:53:58Z
Channel: Adrian Salamunovic
Description: A short YouTube interview clip where two speakers (one an ex-Shopify CFO) discuss earnouts in M&A deals. The core claim: earnouts typically reflect…

30 Sept 2025

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A short YouTube interview clip where two speakers (one an ex-Shopify CFO) discuss earnouts in M&A deals. The core claim: earnouts typically reflect valuation disagreements (buyer values the business lower than the seller) and transfer contingent upside that the seller may not control; an example splits a $100 perceived value into $60 paid now and up to $40 contingent on future targets.

In my experience, an earn out is just a disagreement on valuation that we're postponing. Why? I always try to avoid earnout a company's worth $100. Just keep it super simple. But I'm going to get $60 today, and based on future performance I can get up to 40 more. But then you're not in control of all the inputs as to whether you can achieve that additional 40.
So should they look at the earn out almost like a bonus in their mind if they want it to be successful?
Or I would argue they look at it as zero. Are you happy doing Assuming no earn out, the buyer actually thinks the business is worth 60, you think it's worth 100. You agree to disagree and we're like, well, if you achieve these amazing targets, fine, we'll pay you another 40.