Independent Sponsor Earnout Structures in Specialty Distribution
When the deal is specialty distribution and the question is Earnout Structures, the structure decisions in the first 30 days outlast the next five years. This is where Jason Powell works.
Earnout Structures on specialty distribution deals is one of those workstreams that looks routine on a checklist and decides outcomes in practice.
The typical specialty distribution platform sits at $10M to $100M EV with EBITDA in the $2.5M to $18M range. The thesis runs on vertical buy-up of niche product distributors. Most distribution multiples are wrong by half a turn until the rebate accounting gets normalized.
How Earnout Structures actually gets structured.
Tie the earnout to gross profit or contribution margin, not revenue, to avoid sandbagging.
Cap the earnout window at 24 months. Anything longer is a litigation risk.
Build acceleration on a change of control or buyer-driven operational change.
Name an arbitrator and the accounting standard in the agreement.
In specialty distribution, layer in supplier reaffirmation letters before LOI signs as part of the Earnout Structures workstream.
Drafting the earnout in three paragraphs. Earnouts are the second-most-litigated provision in M&A.
"If the earnout could be measured by a teenager with a spreadsheet, you wrote it well."Jason Powell · Earnout Structures
The deal is one thing. The capital that opens up after close is another.
After close, the call list for refinancing, recapitalization, and growth equity gets short and known. Jason carries that list.
Related deal pages.
LOI Negotiation for Specialty Distribution
The 4 to 8 page agreement that frames the deal economics, exclusivity, and diligence period.
Independent Sponsor Economics for Specialty Distribution
The package of deal-by-deal carry, management fees, and transaction fees that compensates the independent spo…
Management Fee Structuring for Specialty Distribution
The annual fee paid by the deal entity to the independent sponsor for ongoing oversight, board service, and p…
Equity Rollover for Specialty Distribution
The portion of seller proceeds reinvested into the post-close entity, aligning seller with buyer.
Earnout Structures for Healthcare Services
roll-up of physician practices and ancillary service lines
Earnout Structures for Home Services
regional roll-ups of HVAC, plumbing, and electrical operators
An LOI on the desk, a specialty distribution target, and a Earnout Structures question worth a real conversation.
Twenty minutes of practitioner-grade input from a securities attorney whose first move is to read the deal, not the engagement letter.