Cash, Stock, Earnout: Three Dates That Pay You
In a mixed-consideration exit, cash-at-close, lock-up end, and earnout target definitions set the real payout clock, not the headline price.
The headline number is not one payday
Your merger agreement can combine cash, stock, and an earnout into one deal value, but your bank account will not see that number on one day. Grindr has agreed to acquire PurposeMed Inc., the parent of Freddie, with $250 million of upfront consideration: $190 million cash, $60 million stock, and a possible $70 million cash performance payment.
Grindr expects the PurposeMed deal to be completed during the fourth quarter of 2026. Freddie has a U.S. telehealth and pharmacy model. The trap is treating the deal value as a single payment date: stock may be locked, and an earnout can be measured in one year and paid in the next.
Before signing, build a three-date payout clock: the cash-at-close date, the stock lock-up end date, and the earnout target or payment date.
Three dates turn equity into cash
Cash-at-close date. This is the day the buyer pays the cash portion, usually after regulatory and other closing conditions are met. For your own deal, the cash date is the first real payment date, unless the agreement holds back part of the cash in a segregated account or ties it to post-closing adjustments.
Stock lock-up end date. Acquirer stock is not always tradable the moment the deal closes. The agreement may restrict transfers for a stated period, and the end date is when you can actually sell without asking permission. If the lock-up is long, your cash value on day one is lower, because you are holding an illiquid asset. Check for exceptions, such as tax withholding, small personal transfers, or a sale of the buyer that releases the shares early.
Earnout target or payment date. The earnout date is when the performance payment is measured, or when it is paid after measurement. The Grindr-PurposeMed earnout is tied to Freddie hitting 2027 performance targets, with the payment due in 2028. That gap matters: the target year and the payment year are not the same. You may hit the target in one year and still wait to collect in the next.
Five terms decide whether the payout arrives
Use this list before you sign. Each item should be answerable from the merger agreement, side letters, or the earnout schedule.
- Locate the cash-at-close date and confirm whether it is a fixed date, an expected quarter, or a date tied to closing conditions.
- Identify the stock lock-up end date, including any transfer restrictions, release conditions, and exceptions for taxes or small personal transfers.
- Pin down the earnout target definition, measurement period, payment date, and any cap or floor on the amount you can receive.
- Check whether the earnout accelerates if the acquirer is sold, and what price or event triggers that acceleration.
- Confirm who controls the books, data, and operational decisions that determine whether the earnout target is met.
The acceleration item matters because a later sale of the buyer can turn a multi-year earnout into a near-term payout, or fail if the trigger price is too high.
Earnout definitions decide the payout
Earnout language is where the payout clock gets complicated. A target can be revenue, adjusted EBITDA, patient volume, share price, or a mix. Freddie's 2026 plan targets more than $80 million in revenue and more than $10 million in adjusted EBITDA, a profit measure. If your earnout is tied to those numbers, check whether they are measured on a standalone basis, after the companies are combined, or under the buyer's accounting policies.
Stock-based earnouts can be even more precise. In one merger, earnout participants were eligible for as many as 6,000,000 extra Live Oak shares. Those extra shares are earned only if Live Oak stock clears defined price hurdles over the five years after the deal closes. If a qualifying change of control, such as a sale of the buyer, happened during the earnout period at an implied per-share price, the value suggested by the deal terms, of at least $12.00 for Live Oak stock, the earnout accelerated.
In Boost Run's exit, Andrew Karos was eligible for as many as 7,875,000 Pubco Class A shares. The award came in three tranches of 2,625,000 shares. Each tranche required the VWAP, a volume-weighted price average, to reach $12.50, $15.00, or $17.50, respectively, for 20 trading days inside any consecutive 30-trading-day window. The whole earnout ran for three years.
