LOI · Vertical SaaS

Independent Sponsor Earnout Structures in Vertical SaaS

When the deal is vertical SaaS 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.

EV range $10M to $200M EV EBITDA $2M to $30M (or run-rate ARR) Audience Buy & Sell-side
The deal context

Every vertical SaaS acquisition has its own gravity. Earnout Structures is the workstream where independent sponsor counsel earns the seat.

The typical vertical SaaS platform sits at $10M to $200M EV with EBITDA in the $2M to $30M (or run-rate ARR) range. The thesis runs on platform plus adjacent module acquisitions inside a single end-market. The ARR number on the CIM is rarely the ARR number on the closing balance sheet. Reconcile early.

The moves

How Earnout Structures actually gets structured.

  1. Tie the earnout to gross profit or contribution margin, not revenue, to avoid sandbagging.

  2. Cap the earnout window at 24 months. Anything longer is a litigation risk.

  3. Build acceleration on a change of control or buyer-driven operational change.

  4. Name an arbitrator and the accounting standard in the agreement.

  5. In vertical SaaS, layer in ARR bridge built before LOI signing as part of the Earnout Structures workstream.

The common mistake

Drafting the earnout in three paragraphs. Earnouts are the second-most-litigated provision in M&A.

Jason's take
"If the earnout could be measured by a teenager with a spreadsheet, you wrote it well."
Jason Powell · Earnout Structures
Capital after close

The deal is one thing. The capital that opens up after close is another.

The capital that opens up post-close, from refinancing to growth equity to strategic exit, runs through a small set of Wall Street relationships. That network is built in.

MONTH 18
Senior refi
MONTH 24
Dividend recap
MONTH 36
Growth equity
YEAR 4–5
Strategic exit
ENGAGE THE PRACTICE

Earnout Structures for Vertical SaaS, on independent sponsor terms.

Independent sponsor counsel that already speaks fluent deal-by-deal economics, structures clean LPAs, and travels with capital markets relationships for what comes after close.