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Details of any compensation provided by the buyer or seller are also listed, which covers any costs that may arise after the transaction due to conditions that existed prior to the closing of the transaction. Any special tax treatment to which the buyer or seller may be entitled is also listed in the contract. This is often referred to as a tax pact, tax offset, or tax client, but its purpose is always the same, it offers protection to the buyer for any tax liability that may not have been discovered through due diligence. Earn-outs typically consist of conditional and additional payments that can be made upon completion of certain steps related to future performance and expire on a specific date. Earn-outs mitigate the acquisition risk for a buyer and offer the seller a better price if they meet earn-out targets. Earn-outs can be financial in nature (for example. B, meet future revenue targets) or non-financial (e.g. B.key the target`s customers are held after the transaction) and can help manage disagreements about the value of the target if, among other things: there is uncertainty about its future prospects, if it is a start-up with limited financial results but with growth potential, or when the seller will continue to manage the business and the buyer wants to motivate the future performance of the seller. .