Resources
Glossary
Explore our glossary for quick and easy explanations of key terms and concepts related to our products and services.
409A Valuation
A 409A valuation is a third-party assessment that determines the fair market value of a private company’s common stock for tax purposes. This valuation is required when issuing stock options to employees, ensuring compliance with IRS regulations. Accurate 409A valuations help companies avoid penalties and offer employees tax-compliant stock options, playing a critical role in equity compensation packages.
83(b) Election
The 83(b) election allows employees or founders who receive restricted stock to pay taxes on the stock's full market value at the time of grant, rather than at vesting. This can be advantageous if the stock is expected to appreciate, as it locks in a lower tax rate. However, if the stock decreases in value or doesn’t vest, the individual may pay taxes on stock they don’t ultimately own.
A Round Financing
A round financing is the first significant round of financing for a startup, typically led by venture capital firms. This funding round is crucial for scaling operations, expanding the team, and achieving product-market fit to attract further investment.
Absolute Return
Absolute return measures the total return of an investment, independent of benchmarks or market conditions. It focuses purely on the gain or loss realized, making it useful for evaluating performance in private fund strategies. Absolute return strategies often aim for positive returns under any market conditions by employing a range of asset classes and techniques.
Accredited Investor
An accredited investor is an individual or entity allowed to invest in securities not registered with financial authorities. These investors meet specific income or net worth criteria and can access a wider range of investment opportunities. Accredited investors play a crucial role in funding private companies and startups, providing capital that drives innovation and growth.
Accredited Investor Questionnaire
An accredited investor questionnaire evaluates whether an individual or entity meets the legal requirements to qualify as an accredited investor. Accredited investors must satisfy income, net worth, or professional criteria set by regulators, enabling them to participate in certain private investments. This process ensures compliance with securities laws and protects individuals who may not have sufficient financial sophistication.
Accrued Interest
Accrued interest is the interest that accumulates on a loan or bond between payment periods but hasn’t yet been paid to the lender. In investment contexts, accrued interest impacts bond pricing and is often settled when bonds are traded. It’s critical for accounting and cash flow management, especially in funds managing debt instruments. Keeping track of accrued interest ensures accurate financial reporting.
Accrued Interest
Accrued interest represents interest that has accumulated on a loan or bond but has not yet been paid. This interest is typically recorded on the balance sheet as a liability for the borrower and an asset for the lender. Accrued interest is common in bonds, mortgages, and business loans, impacting cash flow management and financial reporting for both borrowers and lenders.
Acquihire
An acquihire is a strategic acquisition where the primary motivation is to hire the target company’s employees, rather than to acquire its products or services. Acquihires are common in the tech industry, where acquiring talent, particularly engineers or developers, is a top priority. This allows acquiring firms to quickly gain expertise, while the target company’s technology or products may be phased out or absorbed.
Acquisition
An acquisition involves purchasing another company through cash, stock, or a combination of both. Acquisitions are used to expand market share, enter new markets, or gain access to proprietary technology. They can be either friendly or hostile, and they play a significant role in growth strategies for private equity firms looking to scale their portfolio companies or make strategic exits.
Adjustment Condition
An adjustment condition is a contractual clause that adjusts the terms of an agreement based on specific future events or market conditions. These clauses are often used to protect investors or shareholders, ensuring that valuations or ownership stakes are fair under changing circumstances. Adjustment conditions are common in M&A and investment agreements.
Alternative Asset Management Software
Alternative asset management software provides specialized tools for managing investments outside of traditional stocks and bonds, such as real estate, hedge funds, and private equity. These technology solutions help streamline operations, improve data accuracy, and enhance communication between managers and investors.
Alternative Investment Management Software
Alternative investment management software refers to digital platforms and tools designed to aid in the management and analysis of non-traditional investment strategies such as private equity, hedge funds, and real estate. This type of software helps investors track and optimize their alternative investment portfolios, as well as streamline operational processes.
Alternative investment management software is designed to manage portfolios of non-traditional investments, such as private equity, hedge funds, and real estate. This software helps automate complex operations, enhance reporting capabilities, and improve communication between managers and investors.
Alternative Investment Vehicle (AIV)
An alternative investment vehicle (AIV) is a subsidiary set up by a private equity fund to hold specific assets separately from the main fund. AIVs are used to facilitate tax-efficient structures or isolate high-risk assets. They are instrumental in providing flexibility to fund managers, allowing them to tailor investment strategies without impacting the primary fund structure.
Alternative Investments
Alternative investments encompass non-traditional assets such as private equity, hedge funds, commodities, and real estate. These investments offer diversification beyond stocks and bonds and are typically less liquid. They are popular among institutional investors looking for higher returns or uncorrelated assets. However, they often come with higher risk and require specialized management.
American Waterfall
An American waterfall prioritizes limited partners in the distribution of profits before the general partner receives any carried interest. This structure ensures that investors recoup their initial investment plus any preferred returns before the general partner receives performance fees. It is commonly used in U.S.-based private equity and real estate funds.
Amortization
Amortization is the process of gradually paying off debt through regular payments over time, where each payment covers both interest and principal. It is commonly applied to loans such as mortgages and business debt. The amortization process ensures that borrowers reduce their debt while managing cash flow, which is critical for financial planning in businesses and real estate investments.
Amortization Schedule
An amortization schedule details the breakdown of each loan payment into interest and principal over the loan term. This schedule helps borrowers understand how their debt decreases with each payment and provides clarity on interest costs. Amortization schedules are used in various types of loans, including mortgages and equipment financing, to forecast future liabilities and manage debt repayment efficiently.
Anchor Investor
An anchor investor is a key early investor in a funding round who commits a significant amount of capital, providing credibility and confidence for other investors to join. Anchor investors often negotiate favorable terms in exchange for their early commitment, and their involvement is crucial in setting the tone for the rest of the investment round. They are especially common in initial public offerings (IPOs) and private equity funding rounds.
Angel Financing
Angel financing is early-stage investment from wealthy individuals, or "angels," who provide capital in exchange for equity in startups. This financing is crucial for startups that have a viable product but lack sufficient revenue. Angels often bring strategic value beyond capital, including mentorship and industry connections, and typically invest in companies before institutional investors become involved.
Angel Investor
An angel investor is an individual who provides capital to early-stage startups, most often in exchange for equity. These investors are crucial for startup growth, offering not only funds but also mentorship and industry connections. Angel investors take on high risks in exchange for the potential of high returns, and their support can be vital for a startup's success.
Angel Round
An angel round is a round of financing raised from angel investors, typically for early-stage startups. This funding is crucial for initial growth and development, allowing startups to build their product and enter the market. Angel rounds often precede larger venture capital investments, providing the necessary resources to reach key milestones and attract further investment.
Angel Syndicate
An angel syndicate is a group of angel investors who pool their funds to invest in startups collectively. This approach allows for larger investments and shared risk among the investors. Syndicate members benefit from shared due diligence and decision-making, and startups receive more substantial funding and support than from individual angel investors.
Annexe Fund
An annexe fund is an additional pool of capital set aside by venture capital firms to support existing portfolio companies. This fund is crucial for follow-on investments and ensuring continued growth and success of portfolio companies. Annexe funds help maintain the momentum of portfolio companies, providing necessary capital for expansion and development when needed.
Anti-Dilution Provisions
Anti-dilution provisions protect investors from dilution of their ownership percentage. They adjust the conversion rate of convertible securities to compensate for issuance of additional shares at a lower price.
Asset Allocation
Asset allocation divides an investment portfolio across asset classes such as equities, bonds, and real estate. This strategy helps balance risk and reward based on an investor's risk tolerance, time horizon, and investment goals. Proper asset allocation is critical for managing portfolio volatility and achieving optimal long-term returns, especially for institutional investors managing diverse funds.
Asset Class
An asset class refers to a group of financial instruments with similar characteristics, risk profiles, and behaviors. Common asset classes include equities, bonds, real estate, and alternative investments. Understanding asset classes is essential for portfolio diversification, as different asset classes often perform differently under varying market conditions. This helps investors balance risk and achieve their desired returns.
Asset Purchase Agreement (APA)
An asset purchase agreement (APA) is a contract detailing the sale and transfer of specific assets from a seller to a buyer. It allows buyers to purchase certain assets of a company without acquiring the liabilities. APAs are commonly used in mergers and acquisitions, providing flexibility in structuring deals and minimizing risks associated with acquiring unwanted obligations. They are ideal for targeted acquisitions.
Asset-Based Lending (ABL)
Asset-based lending (ABL) allows businesses to borrow against assets such as inventory, receivables, or equipment. This financing option provides flexibility and can be an attractive alternative to traditional loans for companies with strong asset bases. ABL is particularly useful for managing liquidity, funding growth, or overcoming short-term cash flow issues.
Assets Under Management (AUM)
Assets Under Management (AUM) refers to the total market value of assets managed by an investment firm on behalf of its clients. AUM is a key indicator of a firm’s size and influence in the investment landscape. Higher AUM often signals greater trust from investors, access to larger deals, and increased economies of scale in managing portfolios.
Automatic Conversion Clause
An automatic conversion clause forces the conversion of preferred shares into common shares upon the occurrence of specific events, such as an IPO or an acquisition. This clause is common in early-stage investments to ensure that preferred shareholders convert their stakes when a company hits certain milestones, aligning investor and company interests.
B Round Financing
B round financing is the second round of funding for a company that has met certain milestones and is ready for growth. This stage is crucial for scaling operations, expanding the market reach, and enhancing the product or service offering.
Balance Sheet
A balance sheet is a financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time. It provides a snapshot of the company's financial condition, helping stakeholders make informed decisions.
Balanced Fund
A balanced fund is a mutual fund that includes a mix of stocks and bonds to provide both income and capital appreciation. This investment strategy aims to balance risk and return, making it suitable for investors with moderate risk tolerance.
Barbell Strategy
A barbell strategy involves investing in high-risk and low-risk assets, avoiding medium-risk options to balance potential returns and stability. This approach aims to capitalize on both ends of the risk spectrum while minimizing overall portfolio risk.
Basis Point
A basis point is a unit of measure used in finance to describe the percentage change in value. One basis point is equal to 0.01%, making it a crucial tool for expressing interest rate changes, bond yields, and other financial metrics accurately.
Bear Hug
A bear hug is a takeover offer made at a significant premium over the target company’s current market value, putting pressure on its board to accept the deal. This tactic is often used to bypass resistance from management and attract shareholder support, making it difficult for the target company to refuse. Bear hugs are common in the M&A landscape where companies seek quick and aggressive acquisitions.
Best Investor Portal Software
The best investor portal software for any given private investment firm is dependent on that firm's particular needs. Some of the top considerations firms should include in their assessment: core product capabilities, ability to service multiple fund types, the limited partner (LP) experience, data ownership and portability, flexibility to work with third-party service providers, mid- and long-term product roadmap, and pricing.
Blue Sky Filings
Blue sky filings are documents submitted to state securities regulators to comply with blue sky laws. These filings provide necessary information to ensure transparency and protect investors from fraud. They are crucial for legal compliance in the securities industry.
Blue Sky Laws
Blue sky laws are state regulations designed to protect investors from securities fraud. These laws require issuers of securities to register their offerings and provide financial details, ensuring transparency and investor protection.
Board of Directors
A board of directors is a group of individuals elected to represent shareholders and oversee the activities of a company. The board's responsibilities include setting corporate policies, making major decisions, and ensuring the company’s long-term success.
Book Value
Book value is the net value of a company's assets, calculated as total assets minus intangible assets and liabilities. It provides a measure of the intrinsic value of a company, often used in fundamental analysis to assess whether a stock is under or overvalued.
Bootstrapping
Bootstrapping is the process of building a business from the ground up without external funding. Entrepreneurs use personal savings and reinvest profits to grow their companies. This approach fosters lean operations and can lead to significant ownership retention but may limit initial growth speed.
Break Up Fee
A break up fee is a penalty paid by a party that backs out of a merger or acquisition agreement. This fee compensates the non-breaching party for time and resources invested in the deal, serving as a deterrent against uncommitted offers.
Breakup Fee
A breakup fee is a financial penalty imposed on a company that withdraws from a merger or acquisition agreement. This fee compensates the other party for time, resources, and missed opportunities due to the failed transaction. Breakup fees are designed to protect deal participants and ensure commitment, particularly in high-stakes negotiations where the cost of failure is significant.
Bridge Financing
Bridge financing is a short-term loan used to meet immediate financial needs until permanent financing is secured. This type of financing helps companies maintain operations and liquidity during transitional periods, such as mergers or acquisitions.
Burn Rate
Burn rate is the rate at which a company uses up its cash reserves before generating positive cash flow. This metric is crucial for startups to monitor, as it indicates how long they can sustain operations before needing additional funding.
Business Development Company
A business development company (BDC) is a type of investment company that invests in small- and mid-sized businesses. BDCs provide capital to companies that may not have access to traditional financing, offering both equity and debt investments. They play a crucial role in fostering growth in emerging enterprises.
Buyout Capital
Buyout capital refers to funds used to acquire a controlling interest in a company. This type of financing is often used in leveraged buyouts (LBOs), where the acquisition is financed primarily with borrowed funds. Buyout capital is crucial for private equity firms seeking to gain control and improve the operational efficiency of target companies.
CAGR Formula
The CAGR formula calculates the average annual growth rate of an investment, incorporating the effects of compounding. The formula is used to assess and compare the performance of investments over time, providing a consistent metric for measuring growth. By using the CAGR formula, investors can make more informed decisions and evaluate long-term growth in portfolios or individual assets.
Call Option
A call option gives the holder the right to purchase an asset at a predetermined price within a specified time frame. Investors use call options to profit from asset price increases without directly owning the asset. This financial instrument is common in hedging strategies, providing potential upside with limited downside risk. Call options are essential for investors seeking to leverage market movements while managing risk.
Capital Allocation
Capital allocation is the process of distributing financial resources to various projects or investments. This strategy is essential for optimizing returns and managing risk in a firm's portfolio. Effective capital allocation helps in achieving strategic objectives and maintaining financial stability, ensuring that resources are used efficiently for the greatest impact.
Capital Available for Investment
Capital available for investment refers to unallocated capital that a fund or investor has set aside to deploy into new investments. It reflects the liquidity position of a firm or individual and is critical for seizing new investment opportunities. This capital is commonly used in private equity or venture capital when firms are actively sourcing new deals or financing follow-on investments in portfolio companies.
Capital Call Distributions
Capital call distributions are made by limited partners in response to a request by a private investment fund to transfer a portion of their committed capital into the fund for investment purposes. Such requests must be tailored to each individual investor based on their capital commitment, and may be subject to clauses in side letters or the original LPA.
Capital Call Notices
Capital call notices are individualized documents issued to Limited Partners by private funds to request contributions of previously committed capital. Such notices can be issued via mail, email, or via dedicated software platform.
Capital Call Software
Capital call software is used by private fund managers to automate the process of generating and distributing individualized capital call notices to Limited Partners. It allows for the issuance of multiple rounds of capital calls with custom economics, and provides greater visibility to LPs through email alerts and aggregate dashboard views.
Capital Call Template
A Capital call template is a document used to automate and distribute individualized capital call notices to Limited Partners directly. It allows for the dynamic generation of capital call documents, multiple rounds of calls with custom economics, and provides greater visibility to LPs through email alerts and dashboard views.
Capital Commitment
Capital commitment is the total amount of capital that investors pledge to contribute to a fund over a specified time period. This commitment is drawn down by the fund as needed for investments. It is a common practice in private equity and venture capital, where capital is deployed gradually. Understanding the terms of capital commitments is critical for fund managers in managing liquidity and meeting portfolio needs.
Capital Gains
Capital gains are profits realized from selling an asset at a higher price than its purchase cost. These gains are subject to taxation, and the rates can vary depending on how long the asset was held. Capital gains are a key driver of investor returns in equity markets, private equity, real estate, and venture capital, where asset appreciation plays a significant role in overall portfolio performance.
Capital Reserve
A capital reserve is a financial buffer derived from profits, typically set aside for future investments, unforeseen expenses, or debt repayment. This reserve strengthens a company’s financial stability by providing a safety net for long-term capital projects or emergencies. Capital reserves are particularly crucial for ensuring a business can handle economic downturns or capitalize on strategic opportunities.
Capitalization Table
A capitalization table is a detailed breakdown of a company's ownership structure. It lists all securities issued by the company, including shares, options, warrants, and convertible securities, and their respective ownership percentages.
Captive Funds
Captive funds are investment vehicles managed by a financial institution or parent company exclusively for its employees, clients, or affiliates. These funds are often used to align the interests of the parent company with its stakeholders. Captive funds offer specialized investment opportunities but may limit investor access to broader markets. They are typically designed to optimize in-house management and capital deployment strategies.
Carried Interest
Carried interest is a share of profits from an investment paid to the investment manager. It serves as a performance fee that aligns the manager's interests with those of the investors.
Cash Position
A cash position represents the total amount of liquid assets that a company holds for immediate use. It is essential for meeting short-term obligations and funding day-to-day operations. Companies with strong cash positions are better equipped to manage downturns, invest in new opportunities, or meet unexpected expenses. Cash position management is critical for maintaining liquidity and financial health, especially in volatile markets.
Cash Sweep
A cash sweep is an automatic transfer of excess cash to pay down debt. It helps firms manage their cash flow and reduce debt faster by using surplus cash to repay outstanding loans.
Catch-up
Catch-up interest is additional interest owed due to deferred payments. It ensures that investors receive the total return expected, compensating for the delay in payment.
Change of Control Provision
A change of control provision allows for contract renegotiation if ownership changes. It protects stakeholders by ensuring they can respond to new ownership scenarios.
Claim Dilution
Claim dilution occurs when the issuance of new debt or equity reduces the value or priority of existing claims. This dilution can affect creditors, shareholders, or other stakeholders, often lowering the recovery potential in the event of a liquidation. Protecting against claim dilution is crucial for investors to maintain their expected returns and priority in capital structures.
Class A Shares
Class A shares are a type of stock with more voting rights than Class B shares. They often provide better control and influence in corporate decisions.
Clawback
A clawback is the recovery of funds disbursed due to non-compliance or fraud. It is a provision that allows firms to reclaim bonuses or incentives if certain conditions are not met.
Closed-End Fund
A closed-end fund is a mutual fund with a fixed number of shares that trades on an exchange. Unlike open-end funds, they do not issue or redeem shares on demand.
Closed-end Fund
A closed-end fund is a publicly traded investment fund with a fixed number of shares. These shares trade on stock exchanges, and the fund’s price fluctuates based on supply and demand, rather than the fund’s net asset value (NAV). Closed-end funds are used for a wide variety of investment strategies, including equities, bonds, and real estate, offering liquidity and access to diverse markets for retail and institutional investors.
Collar Agreement
A collar agreement establishes a price range within which the price of an asset can fluctuate, commonly used in mergers and acquisitions (M&A) to mitigate risks associated with stock price volatility. This agreement ensures that the final price paid in a transaction is within an acceptable range, protecting both buyers and sellers from significant price swings. Collar agreements are especially useful in deals involving stock-based payments.
Committed Capital
Committed capital is the total amount of capital pledged by investors to a fund. It represents the amount that investors are obligated to contribute when called upon by the fund managers.
Common Stock
Common stock represents ownership in a corporation, giving shareholders voting rights on corporate matters and the ability to receive dividends. In the event of liquidation, common stockholders are last to receive any proceeds, after debt holders and preferred shareholders. Common stock is a primary vehicle for raising capital in public and private companies, offering investors potential for growth through stock price appreciation.
Compound Annual Growth Rate (CAGR)
Compound Annual Growth Rate (CAGR) measures the average annual growth rate of an investment over a specified period, accounting for compounding. It is widely used to compare the growth rates of investments and assess their performance over time. CAGR smooths out the volatility of year-to-year growth, providing a clear picture of an investment’s true growth trajectory.
Compulsory Transfer
Compulsory transfer is the mandatory transfer of shares under specific conditions. These conditions are typically outlined in shareholder agreements and ensure compliance with regulatory or contractual obligations.
Convertible Note
A convertible note is a type of short-term debt that converts into equity. This financial instrument is often used by startups to raise capital during early-stage financing rounds.
Convertible Security
A convertible security is a financial instrument that can be converted into another form, usually common stock. Convertible securities, such as bonds or preferred shares, offer investors the benefits of fixed-income investments with the option to convert into equity, depending on the security’s terms. They are often used in venture capital or private equity to balance risk and potential upside.
Cost of Preferred Stock
The cost of preferred stock is the rate of return required by investors in exchange for investing in preferred shares. It is calculated by dividing the annual preferred dividend by the market price of the preferred stock. This cost is a critical component of a company's overall cost of capital, particularly when assessing financing options and making capital structure decisions.
Cramdown
A cramdown is a court-ordered reduction of the amount owed to creditors during bankruptcy proceedings. This process allows the debtor to modify the terms of the debt, often reducing the principal balance, interest rate, or extending the repayment period to facilitate reorganization.
Crossover Fund
A crossover fund is a fund that invests in both private and public equity. These funds aim to capitalize on opportunities across different market segments, providing diversification and potential for higher returns.
Crossover Investor
A crossover investor is an investor who participates in both public and private markets. These investors leverage their expertise in both areas to identify and capitalize on investment opportunities across different stages of a company's lifecycle.
Deal Flow
Deal flow is the rate at which investment opportunities are presented to investors or funds, particularly in venture capital, private equity, or real estate. Strong deal flow is critical for firms seeking to deploy capital efficiently, as it provides access to high-quality investment opportunities. Managing and evaluating deal flow is essential for maintaining competitive advantage and ensuring a steady pipeline of potential investments.
Deal by Deal Carry
Deal by deal carry involves calculating carried interest based on individual investments. This method allows fund managers to realize carry from profitable deals without waiting for the entire portfolio to perform.
Decile Rank
A decile rank divides a data set into ten equal parts to assess performance. Each decile contains 10% of the ranked data. In finance, decile ranks are used to compare fund or stock performance relative to others, helping investors identify top or bottom performers. Decile ranking is a useful tool for portfolio management and performance evaluation, providing clear comparisons within a peer group.
Development Capital
Development capital is funding provided for growth and expansion of a company. It is typically used to finance new projects, acquisitions, or entry into new markets to drive business growth and enhance competitive positioning.
Digital Fund Subscriptions
Digital fund subscriptions are a way to simplify the process of raising a private investment fund by providing a digital subscription experience to Limited Partners. Such technology helps eliminate paperwork and automate busywork for GPs and LPs alike, making it easier for all parties to navigate the subscription process and, ultimately, close a fund faster.
Disinvestment
Disinvestment is the process of selling off assets or withdrawing investments from a company, sector, or country, often for strategic, financial, or ethical reasons. Common examples include companies divesting from industries that no longer align with their core business strategy or investors withdrawing from markets due to political instability. Disinvestment is a key tactic in portfolio management, allowing investors to reallocate capital into more promising areas.
Distributed to Paid-In Capital (DPI)
Distributed to Paid-In Capital (DPI) measures cumulative distributions to investors as a percentage of paid-in capital. It is a key performance metric in private equity, indicating how much capital has been returned to investors.
Distribution Waterfall
A distribution waterfall outlines the order of profit distributions in investment funds. It establishes how and when profits are distributed to investors, prioritizing returns based on different tiers or hurdles. This structure is common in private equity and real estate funds, ensuring that profits are allocated in a manner that aligns with the interests of both investors and fund managers.
Diversification by Time
Diversification by time is an investment strategy that spreads investments over different periods. This approach reduces risk by avoiding market timing and ensuring investments capture various market cycles.
Downside Risk
Downside risk refers to the potential loss in value of an investment. It measures the likelihood and extent of negative returns, helping investors manage and mitigate potential losses.
Drag-along Rights
Drag-along rights allow majority shareholders to force minority shareholders to join in the sale of a company. This ensures that the majority can sell the company without being hindered by minority stakeholders.
Drawdown
Drawdown is the peak-to-trough decline during a specific period for an investment or trading account. It measures the percentage drop from the highest value to the lowest value, indicating the risk and volatility of the investment.
Drawdown Notice
A drawdown notice is a request to transfer funds from an investor to a fund or investment vehicle. It is issued when the fund requires additional capital for investments or operational needs.
Dry Powder
Dry powder refers to cash reserves kept on hand to cover future obligations or take advantage of opportunities. It is crucial for maintaining liquidity and flexibility in investment strategies.
Due Diligence
Due diligence is a comprehensive appraisal of a business undertaken by a prospective buyer. It involves evaluating the business’s financial, legal, and operational aspects to identify potential risks and opportunities.
ERISA
ERISA, the Employee Retirement Income Security Act, sets federal standards for retirement and health plans in the private sector. It ensures that plan participants receive adequate protections, including fiduciary responsibility, transparency in reporting, and safeguarding of assets. For institutional investors managing pension funds, ERISA compliance is critical to maintaining regulatory standards and protecting plan beneficiaries.
Earnout
An earnout is a contractual provision used in mergers and acquisitions where the seller receives additional compensation if the business meets specified financial targets after the sale. This structure aligns the interests of both buyer and seller by tying part of the purchase price to the company's future performance. Earnouts are often used when there is uncertainty about the company’s potential.