Glossary

Deferred consideration

Deferred consideration is part of a sale price paid later, often tied to future performance (an earn-out) — a way to bridge price gaps and share risk between buyer and seller.

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Price paid laterSometimes performance-linked

Earn-out mechanismBridges valuation gaps

Definition

Deferred consideration is a portion of the price for a business or asset paid after completion, sometimes fixed and sometimes contingent on future results (an "earn-out").

In plain terms

When buyer and seller disagree on value, deferring part of the price — payable if the business hits targets — bridges the gap and keeps the seller motivated.

Why it matters for your company

For a buyer, deferred consideration eases upfront funding but creates a future liability to plan for; for a seller it carries risk. It features heavily in MBOs and acquisitions. See enterprise value.