How Earnouts Work in Casino Business Sales

The earnout is one of the most widely used and most frequently contentious deal structures in iGaming M&A. At its core, an earnout allows buyer and seller to close a transaction even when they disagree on the current value of the business — by making a portion of the total consideration contingent on the business achieving specified performance milestones post-closing.

For buyers, earnouts reduce the risk of overpaying for a business whose trailing performance may not reflect its sustainable run rate. For sellers, they provide access to a higher total consideration than a purely upfront transaction might offer, at the cost of some continued performance accountability. When structured well, earnouts close deals that would otherwise fail on valuation. When structured poorly, they create years of post-closing disputes, misaligned incentives, and legal friction.

This guide covers how earnouts work in iGaming M&A specifically — the metrics that are used, the structures that work, the pitfalls to avoid, and the negotiating principles that experienced advisors apply to reach arrangements that both parties can honour.

Why Earnouts Are Common in iGaming M&A

iGaming businesses are volatile by nature. Revenue can fluctuate significantly based on player behaviour, regulatory changes, algorithm updates affecting SEO traffic, shifts in affiliate programme economics, or the competitive environment in a given market. This volatility makes it genuinely difficult for buyers and sellers to agree on a single fair value at a point in time.

The fundamental problem an earnout solves is informational asymmetry. The seller has operated the business for years and has deep confidence in its sustainable performance. The buyer is evaluating the same business with 60–90 days of due diligence and can see patterns in the historical data but cannot observe the operational drivers as directly. The seller believes the business is worth X. The buyer believes it is worth 0.7X. An earnout allows the transaction to close at a headline of Y — somewhere between X and 0.7X — with a contingent component that pays the seller the difference if the business proves the seller right.

Beyond the valuation gap bridge, earnouts also serve as a seller commitment mechanism. When part of the seller’s consideration depends on post-closing performance, the seller has a financial incentive to ensure a smooth transition, retain key relationships, and support the buyer through the handover period. This alignment is particularly valuable in iGaming, where institutional knowledge of affiliate programme relationships, regulatory interactions, and CRM strategy is often concentrated in the founding operator.

The Basic Earnout Structure

A standard iGaming earnout works as follows: the buyer pays an upfront consideration at closing (typically 60–80% of the agreed headline price), with the remaining 20–40% contingent on the business achieving specified performance targets over an agreed post-closing period.

The earnout payment can be structured as a single payment at the end of the period (the seller receives nothing additional until the end, then receives the contingent amount in full, in part, or not at all depending on performance), or as a series of quarterly or annual payments tied to rolling performance benchmarks.

The performance targets must be specified precisely in the Sale and Purchase Agreement (SPA). Vague earnout provisions — ‘if the business performs well’ or ‘if EBITDA is in line with projections’ — are an invitation to dispute. The SPA must define exactly which metric is being measured, how it is calculated, who does the calculation, what the threshold is for partial and full earnout payment, and what happens if the business is materially changed by the buyer post-closing in ways that affect performance.

Which Metrics Work Best as Earnout Triggers

The choice of earnout metric is one of the most consequential decisions in iGaming deal structuring. The metric must be objectively measurable, verifiable by both parties, and not susceptible to manipulation by either side post-closing.

GGR (Gross Gaming Revenue)

GGR is the most commonly used earnout metric in iGaming because it is the primary top-line revenue number, is clearly defined in standard iGaming accounting, and is directly observable from platform reports that both parties can access. The risk with GGR as a sole earnout metric is that a buyer can influence GGR through their bonus spend decisions — reducing bonuses reduces GGR while improving margins, potentially short-changing the seller on the earnout while improving the business’s profitability.

NGR (Net Gaming Revenue)

NGR — GGR minus bonuses and promotions — removes the bonus manipulation risk and better reflects the underlying commercial performance of the business. The counterpoint is that the buyer now has an incentive to increase bonus spend (which reduces NGR), though this works against the buyer’s own interests if they’ve acquired the business for its profitability.

EBITDA

EBITDA earnouts provide the cleanest alignment between the earnout metric and business value, but are the most susceptible to manipulation — the buyer can make discretionary decisions about cost allocation, marketing spend, and overhead charging that directly affect EBITDA without improving the underlying business. EBITDA earnouts require detailed provisions about permissible cost changes and allocation methodologies during the earnout period.

Active Player Count

Player count earnouts are sometimes used when the primary acquisition thesis is the player database. A threshold of ‘X active players (90-day deposit) at the end of month 12’ is objective and directly measurable. The limitation is that player count doesn’t capture revenue quality — a high player count with low ARPU is a different business from a smaller, higher-value player base.

Hybrid structures

Many iGaming earnouts use a hybrid metric — for example, NGR subject to an EBITDA margin floor. This structure rewards the seller for revenue performance while preventing the buyer from over-spending to inflate NGR at the expense of margins. Hybrid metrics add complexity but produce more durable earnout arrangements.

Earnout Period: How Long Is Appropriate?

iGaming earnout periods typically run 12–24 months. The appropriate length depends on what the earnout is designed to test.

If the earnout is primarily testing whether trailing revenue is sustainable — i.e., whether the last 12 months’ performance reflects a real run rate or was inflated pre-sale — then 12 months post-closing is usually sufficient. One full year of post-acquisition performance at or above the threshold demonstrates that the seller’s representation of business quality was accurate.

If the earnout is testing the success of an integration or the seller’s contribution to a growth target, 18–24 months may be appropriate. Longer earnout periods are harder on the seller (who has deferred consideration for an extended period) and create more opportunity for operational disagreements — they should only be used when the performance question genuinely requires more time to answer.

Periods beyond 24 months are unusual in iGaming M&A and are generally not recommended. The industry moves quickly — market conditions, competitive environments, and regulatory landscapes can change significantly over two years, making it increasingly unfair to hold the seller accountable to targets set at signing.

Common Earnout Structures in iGaming

The Buyer’s Obligations During an Earnout Period

An earnout creates ongoing obligations for the buyer, not just the seller. The buyer must operate the business in a way that gives the seller a fair opportunity to achieve the earnout targets. Failure to do so — through deliberate actions or negligence — is the most common source of earnout disputes.

The SPA should specify: the buyer’s obligation to maintain the business as a going concern and not make material changes to the business model without seller consent during the earnout period; restrictions on cost reallocation or overhead charging that would artificially depress EBITDA or NGR; the seller’s right to regular reporting on earnout metric performance; a process for resolving accounting disagreements; and the consequences of a material breach of the buyer’s operating obligations.

For iGaming specifically, the key buyer obligations during an earnout period typically include: maintaining the existing affiliate programme structure and commission rates (material changes to affiliate economics directly affect FTD volume and therefore GGR); continuing to honour existing player promotions and VIP arrangements; not migrating to a new platform in a way that creates player disruption during the earnout period; and maintaining the existing CRM programme cadence.

Earnout Disputes: How They Arise and How to Prevent Them

Earnout disputes are the most frequent source of post-closing litigation in M&A generally and iGaming specifically. The disputes almost always trace to one of three sources: metric definition ambiguity, buyer operational decisions that the seller believes were designed to suppress the earnout, or measurement disagreements.

The most effective prevention is precise drafting at the SPA stage. This means: defining every metric used in the earnout clause with arithmetic-level precision; specifying which accounting standards apply and who is responsible for preparing the earnout calculation; establishing a clear dispute resolution process (independent accountant arbitration is standard); and including specific provisions about what operational changes require seller consent during the earnout period.

CasinosBroker routinely advises on earnout structuring as part of our transaction management service. The clauses that prevent disputes later are written before signing — not negotiated during a dispute. Spending adequate legal resource on the earnout clause at the drafting stage is consistently the most cost-effective investment in any iGaming transaction.

When an Earnout Is and Isn’t the Right Structure

Earnout is appropriate when:

• There is a genuine valuation gap between buyer and seller views on normalised EBITDA or revenue

• The seller’s continued involvement in the business during transition creates real value that can be incentivised

• The business has shown recent growth that the buyer wants the seller to stand behind

• Due diligence has identified specific revenue items whose sustainability is uncertain

Earnout is not appropriate when:

• The seller will have no post-closing operational involvement — earnouts require seller engagement to be effective

• The buyer plans material operational changes immediately post-closing that will make the business unrecognisable from the earnout baseline

• The metric cannot be cleanly defined and measured without dispute risk

• The valuation gap is so large that no earnout period could realistically bridge it — this usually means the deal simply isn’t viable at current expectations

Frequently Asked Questions

Q: What percentage of iGaming M&A deals include an earnout?

Based on CasinosBroker’s transaction history, approximately 40–55% of mid-market iGaming deals (€500K–€10M enterprise value) include some form of deferred or contingent consideration. The prevalence increases with deal size — larger transactions almost always include some contingent element because the valuation stakes are higher and the due diligence period is insufficient to eliminate all uncertainty about normalised performance.

Q: Can I negotiate the earnout metric after the LOI is signed?

The LOI should specify the earnout mechanism at a high level — the metric category, the period, and the contingent amount. Detailed metric definition is typically worked out in the SPA negotiation. However, changing the fundamental metric after the LOI is signed (from GGR to EBITDA, for example) is a material renegotiation that can destabilise the transaction. It’s far better to be specific in the LOI about the metric type to avoid later friction.

Q: What happens if the buyer sells the business during the earnout period?

The SPA should address this explicitly. Most earnout provisions include a change-of-control clause that either accelerates the earnout payment in full, calculates a pro-rated payment based on performance to date, or requires the incoming acquirer to assume the earnout obligation. Without a clear provision, a sale during the earnout period creates significant legal complexity — the original seller may find themselves in an earnout relationship with an unknown third party.

Q: How is the earnout calculation typically verified?

The buyer prepares the earnout calculation from the business’s own financial records. The seller has a right to review and challenge this calculation within a specified period (typically 30–60 days). If the parties cannot agree, the SPA should provide for independent arbitration by a mutually agreed accountancy firm whose determination is binding. The costs of arbitration are typically split equally unless one party’s position is found to be materially unreasonable.

Q: Can the seller walk away from an earnout if they’re dissatisfied with how the buyer is operating the business?

Sellers cannot unilaterally exit an earnout and claim the contingent amount unless the buyer has materially breached the operating covenants in the SPA. However, if the buyer has made operational changes that the SPA explicitly required seller consent for — material affiliate programme changes, platform migration during the earnout period, significant overhead reallocation — the seller may have grounds to argue the earnout target was improperly suppressed, either through the SPA’s dispute resolution mechanism or, if necessary, through litigation.

Q: Is an earnout better for buyers or sellers?

Earnouts transfer risk from buyer to seller relative to an all-cash upfront transaction at the same headline price. From the buyer’s perspective, they reduce the risk of overpaying for revenue that doesn’t materialise. From the seller’s perspective, they provide access to a higher total consideration than a conservative all-cash offer would deliver, but introduce performance risk and operational dependency on the buyer’s goodwill. Whether an earnout is ‘better’ depends on each party’s confidence in future performance and their respective risk tolerance.

Q: What role does CasinosBroker play in earnout negotiations?

CasinosBroker advises on earnout structure as part of our M&A advisory mandate — on both the buy and sell side. This includes recommending appropriate metric choices based on the specific business profile, advising on earnout period and payment structure, reviewing proposed earnout clauses for fairness and dispute risk, and working with transaction counsel to ensure the SPA earnout provisions are clear and enforceable. Our experience across 110+ iGaming transactions means we have direct exposure to the earnout structures that work and those that produce post-closing disputes.

Q: How does an earnout interact with a licence transfer process?

This is a frequently overlooked complexity. If the gaming licence transfers 90–120 days post-closing (as is typical for MGA and UKGC change-of-control processes), the business may be operating under interim arrangements during the early part of the earnout period. The SPA should address how the earnout calculation is affected if the licence transfer introduces operational disruption, player uncertainty, or revenue impact during the transition. Buyers and sellers should model the earnout reference period carefully in light of regulatory timelines.

Q: Are there alternatives to an earnout for bridging a valuation gap?

Yes. Common alternatives include: seller financing (where part of the purchase price is structured as a loan from the seller, paid from the business’s future cash flows — similar economic effect to an earnout but with a fixed repayment schedule rather than contingent on performance); equity rollovers (where the seller retains a minority equity stake and participates in future value creation); and phased completions (where the transaction closes in stages based on agreed milestones). CasinosBroker advises on the full range of deal structures to find the approach that best fits each transaction’s specific dynamics.

Q: What is a typical earnout amount as a percentage of headline price?

In iGaming M&A, contingent consideration typically represents 20–40% of the headline enterprise value. Below 20%, the earnout is unlikely to provide meaningful protection to the buyer or meaningful upside to the seller — it may not justify the complexity. Above 40%, the seller faces significant uncertainty on a large portion of their consideration, which can impair the deal economics to the point where the transaction doesn’t reflect fair value for the seller. The 20–40% range represents the practical band where earnouts are most frequently deployed effectively.