Earn‑outs in Spain M&A 2026: When to Use, How to Negotiate and Enforce Them

Earn-outs in Spain M&A have re-emerged in 2026 as one of the most effective tools for bridging valuation gaps in a market defined by persistent uncertainty in technology and life-sciences deals. As buyers and sellers struggle to agree on the enterprise value of intangible-heavy businesses, contingent consideration is again taking centre stage, often alongside, and sometimes instead of, escrows and warranty and indemnity (W&I) insurance. This decision guide takes a clear position on when earn-outs make sense, how to negotiate them, and how to draft and enforce them under Spanish law. It is written for corporate counsel, private equity teams, founders and tax leads who need a practical framework rather than a hedged academic survey.

Where the answer is “prefer an earn-out,” we say so, and where another structure wins, we say that too.

Executive summary, quick decision checklist

If you take away nothing else, take this:

• Prefer an earn-out when the target has high, identifiable upside tied to measurable KPIs, the buyer wants to pay for future growth rather than speculative projections, and the seller will accept some deferral in exchange for a higher total price.
• Avoid an earn-out where projections are reliable, integration will materially change how performance is measured, or the parties cannot agree a clean, auditable metric, an escrow, W&I policy or price-adjustment mechanism will serve better.

Top five negotiation priorities:

1. Define the KPI with a precise calculation method, exclusions and normalisation rules.
2. Fix governance and information rights so the seller can verify the number.
3. Lock in anti-gaming covenants controlling post-closing conduct.
4. Secure payment through escrow, guarantees or set-off caps.
5. Agree a fast, expert-led dispute mechanism before signing.

Top three enforcement risks: ambiguous KPI definitions, buyer conduct that suppresses the metric, and slow or ill-suited dispute forums. Each is preventable with disciplined drafting.

What is an earn‑out and how it works under Spanish law

An earn-out is a portion of the purchase price that becomes payable only if the acquired business achieves defined performance targets after closing. In an earn-outs in Spain M&A context, the deferred sum is typically calculated over a measurement period of around one to three years and paid once the agreed metric is confirmed. The mechanism lets a seller share in the upside it believes the business will generate, while protecting the buyer from overpaying for growth that never materialises.

Spanish law does not regulate earn-outs by name. They are contractual constructions built on the general freedom of contract enshrined in the Código Civil, subject to the requirements of valid consent, lawful object and cause, and the overarching duty of good faith in performance and interpretation. Because the Civil Code fills gaps where the contract is silent, a poorly drafted earn-out invites judicial interpretation, which is exactly what parties want to avoid.

The most common earn-out types are:

• Revenue-based. Payment tied to turnover thresholds, simple to measure but easy to distort through discounting or channel shifts.
• EBITDA-based. Tied to profitability, more aligned with value but more exposed to accounting and cost-allocation disputes.
• Milestone-based. Triggered by discrete events such as a regulatory approval or product launch, common in biotech.

Typical payment mechanisms

Earn-outs are structured either as a single payment after a defined period, or as staged payments across successive measurement windows. Single-payment structures are cleaner but concentrate risk; staged payments smooth cash flow and reward sustained performance, at the cost of longer governance and monitoring obligations. Many 2026 tech deals adopt staged annual tranches with a cumulative catch-up, so that a strong later year can recover an earlier shortfall.

How SPAs label and structure contingent consideration

Spanish share purchase agreements (SPAs) distinguish between an earn-out, consideration contingent on future performance, and deferred consideration, which is a fixed amount simply paid later. The distinction matters for both accounting recognition and tax timing. A deferred consideration SPA in Spain treats the amount as certain but postponed; an earn-out treats it as uncertain until the trigger is met. Drafting must make the category unambiguous, because mislabelling contingent consideration in Spain as deferred consideration can create unintended tax and balance-sheet consequences.

Decision framework, when to use earn‑outs in Spain M&A

This is the heart of the decision. The table below compares the four principal tools for allocating value and risk in a Spanish deal. Read it as a decision matrix, not a menu of equally valid options, for any given transaction, one structure usually wins.

Choose an earn-out when: the target has genuine upside tied to identifiable KPIs, the buyer wants to pay for future growth rather than speculation, the seller will accept some risk for a higher total consideration, and both sides can draft enforceable KPI and governance mechanisms.

Choose an escrow when: the dominant concern is seller warranty or indemnity risk and the parties want a straightforward source of funds against defined claims.

Choose W&I insurance when: the seller wants to avoid post-closing liability, the buyer wants coverage for breaches, and the deal size and risk profile justify the premium.

Choose fixed price plus adjustment when: projections are reliable, or the parties prefer immediate closure with a limited, predefined true-up based on agreed completion accounts.

Sector use cases, tech, life-sciences, industrial

In SaaS and other technology businesses, earn-outs typically hinge on recurring-revenue metrics, annual recurring revenue (ARR) or net revenue retention, because these track the value the buyer is really buying. In life-sciences, milestone earn-outs are common: payment on a regulatory approval, a successful clinical readout, or a commercial launch. Industrial and services targets, where earnings are steadier and forecasts more reliable, are often better served by a fixed price with a completion-accounts adjustment, and earn-outs there can add complexity without proportionate benefit.

Cross-border considerations

Cross-border earn-outs raise three recurring issues. First, currency: fix the currency of measurement and payment, and allocate FX risk explicitly. Second, accounting: specify whether the KPI is measured under the Spanish Plan General de Contabilidad or IFRS, because the same business can produce different EBITDA under each framework. Third, jurisdiction: decide early whether disputes go to Spanish courts or arbitration, and where any foreign buyer’s assets sit for enforcement. Getting these wrong is the most common source of avoidable friction in cross-border earn-outs in Spain M&A.

Negotiation priorities and drafting checklist (buyer & seller playbook)

Drafting earn-out clauses well is the difference between a mechanism that pays out cleanly and one that lands in a multi-year dispute. The following playbook sets out what each side should fight for.

Defining the KPI

The KPI clause is where most earn-out disputes are won or lost. It must specify:

• The metric. A single, defined figure, ARR, revenue, EBITDA or a milestone event, with no room for competing interpretations.
• The calculation method. The exact formula, the accounting standard applied, and the source records used.
• Exclusions and normalisation. What is stripped out (transaction costs, group recharges, one-offs) so the metric reflects underlying performance, not accounting noise.
• Caps and floors. A maximum payout to protect the buyer and, where negotiated, a minimum to protect the seller from marginal shortfalls.

Sellers should push for accounting-policy continuity, a clause fixing the policies used to calculate the metric so the buyer cannot change accounting treatment to depress the result. Buyers should insist on clear exclusion of acquisition-driven synergies the seller did not create. Earn-out KPIs in Spain for tech targets increasingly reference net revenue retention precisely because it is harder to manipulate than headline revenue.

Governance and information rights

An earn-out is worthless to a seller who cannot verify the number. Negotiate:

• Reporting. Periodic management accounts and a defined earn-out statement at each measurement date.
• Audit and inspection. The seller’s right to review the underlying records and to appoint an independent accountant.
• Covenants. Buyer undertakings to maintain systems and provide access throughout the earn-out period.

Directors’ duties under the Ley de Sociedades de Capital remain relevant here: post-closing conduct by the target’s directors that damages the earn-out metric can support good-faith arguments, and well-drafted governance rights make such conduct easier to detect.

Payment mechanics and security

Deferred money is only as good as the covenant to pay it. Sellers should seek to secure the earn-out through an escrow of part of the consideration, a parent-company or bank guarantee, or a charge over assets. Buyers will resist tying up capital and will seek broad set-off rights against warranty claims. The negotiated compromise usually caps set-off, ring-fences the earn-out from unrelated disputes, and provides a clear payment date once the metric is agreed or determined.

Anti-gaming and conduct covenants

Because the seller no longer controls the business but still depends on its performance, anti-gaming covenants are essential. Common provisions restrict the buyer from diverting revenue to affiliates, imposing disproportionate intra-group charges, or undertaking extraordinary transactions (disposals, restructurings) that suppress the metric. Where founders stay on, the SPA typically locks in management, ties continued involvement to the earn-out, and calibrates non-compete and good-leaver/bad-leaver terms accordingly, subject to the limits Spanish employment law places on such arrangements.

Sample clause bank (illustrative only)

The following snippets are illustrative drafting starting points, not legal advice, and must be adapted to each transaction.

Revenue-based: “The Earn-Out Amount shall equal 1.5 times the amount by which Net Revenue of the Company for the Earn-Out Period exceeds EUR [•], calculated in accordance with the Agreed Accounting Policies and excluding [intra-group sales / non-recurring items], subject to a maximum of EUR [•].”

EBITDA-based: “The Earn-Out Amount shall be [•]% of Adjusted EBITDA for the financial year ending [•], where Adjusted EBITDA is determined under the Agreed Accounting Policies, normalised to exclude Buyer-imposed management charges and any synergies arising from the Transaction.”

Milestone-based: “The Buyer shall pay EUR [•] within [30] days of the Company obtaining [marketing authorisation from the relevant regulatory authority] for [Product], provided such authorisation is obtained on or before [long-stop date]; failing which no Earn-Out Amount shall be payable in respect of this milestone.”

Tax and accounting interactions

Deal teams must model the tax and accounting consequences before agreeing an earn-out, because the structure directly affects timing and recognition. On accounting, the Plan General de Contabilidad governs how contingent consideration in Spain is recognised and measured. In a business combination, a buyer generally recognises contingent consideration at fair value at the acquisition date, with subsequent treatment following the applicable rules, a treatment that differs from a simple deferred payment and requires early input from the accounting team.

On tax, the treatment turns on how the consideration is characterised and when it becomes payable. For a corporate seller, gains typically arise under the corporate income tax regime, and the timing of recognition of contingent amounts is a key planning point; for an individual founder, the personal income tax analysis differs and the earn-out may crystallise as further consideration when the trigger is met. General guidance and binding rulings (consultas vinculantes) are published by the Dirección General de Tributos and the Agencia Estatal de Administración Tributaria, and teams should confirm the current position for their specific structure rather than assume continuity.

Withholding tax and cross-border payments

Where the seller is non-resident, payments under a cross-border earn-out may attract Spanish non-resident income tax, subject to any applicable double-tax treaty relief. The SPA should allocate this risk, address gross-up, and require the documentation needed to claim treaty benefits. Because these amounts fall due years after closing, build a mechanism to refresh tax residence certificates at each payment date. A dedicated deep-dive on earn-out tax and accounting in Spain supports this pillar and should be consulted for complex structures.

Enforceability in Spain, patterns, courts and arbitration

Earn-out enforcement in Spain is fundamentally a question of contract. A clearly drafted earn-out is enforceable under the Civil Code, and Spanish courts and tribunals will give effect to KPI mechanics, governance rights and payment obligations as agreed. The good-faith principle underpins enforcement in both directions: it supports a seller arguing that the buyer deliberately suppressed the metric, and it supports a buyer resisting an opportunistic reading of an ambiguous clause. The practical lesson is that drafting quality, not the availability of a remedy, determines outcomes.

The recurring dispute patterns are predictable:

• KPI calculation disputes. Disagreement over how the metric is computed, which accounting policies apply, and what is excluded.
• Anti-gaming and manipulation claims. Allegations that the buyer diverted revenue, loaded costs, or restructured to defeat the earn-out.
• Trigger and conduct disputes. Arguments over whether a milestone occurred or whether the buyer breached a conduct covenant.

Practical enforcement steps

Where a payment is withheld, the seller’s toolkit includes exercising contractual audit and inspection rights, invoking the agreed expert-determination or arbitration process, and, in urgent cases, seeking interim measures to preserve evidence or restrain asset dissipation. For cross-border deals, arbitration awards benefit from the enforcement regime of the New York Convention (1958), to which Spain is a party, making a Spanish-seated or foreign award enforceable across the many contracting states. This is a decisive advantage where a foreign buyer’s assets sit outside Spain.

Remedies: damages versus specific performance

Spanish law allows both damages and specific performance. In practice, an earn-out dispute usually resolves into a claim for the unpaid amount, effectively enforcement of the payment obligation, once the metric is determined. Anti-gaming breaches sound in damages measured by the earn-out the seller would have earned but for the buyer’s conduct. Drafting a clear determination mechanism converts what could be a lengthy damages fight into a straightforward debt claim.

Dispute prevention and resolution clause checklist

Prevention beats enforcement. Build the following into the SPA:

• Expert determination for accounting disputes. Refer KPI calculation disagreements to an independent accountant whose decision is final and binding, on a defined timetable.
• Escalation ladder. Require senior-executive negotiation before formal proceedings begin, with a short, fixed cooling-off window.
• Arbitration for substantive disputes. Where arbitration is chosen, specify the seat, the rules, the language, and the number of arbitrators; arbitration in Spain is governed by Ley 60/2003, de Arbitraje.
• Emergency and interim relief. Preserve the right to seek an emergency arbitrator or court interim measures without waiving the arbitration agreement.
• Claim timelines and limitation. Set clear notification deadlines and a defined limitation period for earn-out claims to avoid stale disputes.

The best practice for earn-outs in Spain M&A is to split the mechanism in two: send purely numerical disputes to a fast expert determination, and reserve arbitration or the courts for questions of breach, conduct and interpretation.

Practical case studies

The following illustrative scenarios show how drafting choices play out in practice.

SaaS KPI dispute resolved by expert determination. A buyer and a founder-seller disagree over whether a large enterprise contract counts toward the ARR target. Because the SPA sends the calculation question to an independent accountant, the point is resolved quickly and the parties avoid litigation entirely, a direct return on precise KPI drafting.

Biotech milestone triggered. A milestone earn-out turns on obtaining a regulatory authorisation before a long-stop date. Where the authorisation is granted in time and the trigger clause is unambiguous, payment follows within the contractual window. The lesson: milestone clauses reward binary, verifiable events over subjective performance measures.

Buyer withholds payment for alleged breach. A buyer refuses to pay an EBITDA earn-out, asserting a warranty breach and exercising set-off. Where the SPA caps set-off and ring-fences the earn-out from unrelated claims, the seller can press for payment of the undisputed portion while the balance is resolved separately. The takeaway: security and set-off drafting decides who holds leverage when a dispute erupts.

Conclusion & recommended next steps

Earn-outs in Spain M&A are the right structure when the deal turns on future performance the parties can measure, and the wrong one when a fixed price, escrow or W&I policy would deliver certainty at lower cost. Our position is clear: use an earn-out only where you can define a clean, auditable KPI, secure the payment, and control post-closing conduct, otherwise choose a simpler tool. For sellers, the immediate steps are to insist on accounting-policy continuity, verification rights and payment security. For buyers, they are to cap the payout, ring-fence set-off, and lock in anti-gaming covenants. Both sides should agree the dispute mechanism, expert determination for numbers, arbitration for breach, before signing.

Done well, earn-outs in Spain M&A convert a valuation stand-off into a deal that both sides can live with.

To take this further, review the Spain M&A practice area and consult the GLE lawyer directory for Spain M&A for bespoke drafting support. Supporting resources, an earn-out clause bank for Spain, a tax and accounting deep dive, a dispute-resolution guide, and KPI templates for SaaS and biotech, extend this pillar guide in detail.

Sources

1. Real Decreto Legislativo 1/2010, Ley de Sociedades de Capital
2. Código Civil (Spanish Civil Code)
3. Real Decreto 1514/2007, Plan General de Contabilidad
4. Ley 60/2003, de 23 de diciembre, de Arbitraje
5. Agencia Estatal de Administración Tributaria
6. Comisión Nacional del Mercado de Valores (CNMV)
7. Consejo General de la Abogacía Española
8. UNCITRAL, New York Convention resources