EBITDA Earn-Out Targets

This problem practices how earn-outs are structured in M&A and why buyers and sellers often tie contingent consideration to EBITDA rather than to other operating measures. It tests whether you understand how valuation, incentive design, and accounting judgment interact in a transaction, and why interviewers care about choosing a target that aligns the seller’s incentives with true business performance.

A strong answer should explain the logic behind using a metric that is closely related to the way the business is valued, as well as why it can be a better proxy for sustainable value creation than measures that can be more easily distorted. Interviewers ask this kind of question to see whether you can connect deal structure to valuation mechanics and think critically about how financial targets affect behavior after closing.