M&A Earn-Out Breakpoint Calculator

Surface the EBITDA breakpoint sellers must clear to unlock contingent consideration. Enter the up-front purchase price, the earn-out percentage, and the EBITDA target to compare total consideration at downside, base, and upside performance. Add an optional EBITDA projection to see realized payouts, or adjust the sensitivity band to mirror board-approved scenarios.

Cash or stock value funded at close before performance-based adjustments are applied.
Percentage of EBITDA that converts to contingent consideration once performance hurdles are met.
EBITDA hurdle that unlocks contingent payments according to the purchase agreement.
Optional — defaults to the EBITDA target when blank so you can gauge realized payouts.
Optional — defaults to 20.00% when blank. Determines how far upside and downside scenarios deviate from target.

For illustrative deal analysis only. Validate payout structures and tax implications with your transaction advisors before signing.

Examples

  • Example 1 — $40,000,000.00 guarantee, 20.00% earn-out, $5,000,000.00 target EBITDA, $6,500,000.00 projected EBITDA, 20.00% band ⇒ Total payout at target EBITDA: $41,000,000.00 (USD) | Earn-out payout at target: $1,000,000.00 (USD) | Total payout at 20.00% downside: $40,800,000.00 (USD) | Total payout at 20.00% upside: $41,200,000.00 (USD) | Total payout at actual EBITDA ($6,500,000.00): $41,300,000.00 (USD) | Incremental value per additional $1,000,000 EBITDA: $200,000.00 (USD)
  • Example 2 — $25,000,000.00 guarantee, 15.00% earn-out, $4,000,000.00 target EBITDA, sensitivity band left blank ⇒ Total payout at target EBITDA: $25,600,000.00 (USD) | Earn-out payout at target: $600,000.00 (USD) | Total payout at 20.00% downside: $25,480,000.00 (USD) | Total payout at 20.00% upside: $25,720,000.00 (USD) | Total payout at actual EBITDA ($4,000,000.00): $25,600,000.00 (USD) | Incremental value per additional $1,000,000 EBITDA: $150,000.00 (USD)

FAQ

How should I handle tiered earn-out percentages?

Use a weighted-average earn-out percentage that reflects expected EBITDA distribution, or run multiple passes with different breakpoints to bracket likely payouts.

Can I compare multiple EBITDA scenarios at once?

Yes. Adjust the projected EBITDA input or widen the sensitivity band to see how downside and upside cases reshape total consideration, then export each result for your deal model.

Does the calculator account for caps on earn-out payments?

If your agreement contains a cap, replace the projected EBITDA with the level that would hit the cap so you can compare capped and uncapped consideration.

How do I interpret the incremental value output?

The incremental value per additional $1,000,000 of EBITDA equals the earn-out percentage multiplied by one million. It shows how much extra total consideration each incremental EBITDA million delivers above the base plan.

What if the earn-out uses revenue instead of EBITDA?

You can repurpose the tool by entering revenue as the target and projected figures as long as the earn-out percentage mirrors your revenue-based schedule.

Additional Information

  • Earn-out payout equals EBITDA multiplied by the earn-out percentage, so profitability changes flow through one-to-one into contingent dollars.
  • Downside and upside scenarios apply the sensitivity band to the EBITDA target, approximating board-approved cases or banker stress tests.
  • Incremental value per additional $1,000,000 of EBITDA shows how much extra consideration sellers collect for every incremental million earned.
  • When projected EBITDA is omitted, the tool reuses the target value so totals always populate and comparison charts remain complete.
  • All monetary figures assume USD for clarity, but the methodology works for any currency if you keep units consistent.

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