Private equity's share of global M&A deals featuring an earnout provision rose last year to its highest level since 2020 as fund managers leaned on deferred payments to close transactions in a challenging dealmaking environment. Private equity- and venture capital-backed deals accounted for 26.5% of the 2023 total, up from 17.3% in 2022. Earnouts link a portion of a company's sale price to its future performance, and they are typically used to bridge the gap between what a seller thinks the business is worth and what a buyer is willing to pay — the valuation gap. Earnouts have become the "go-to tool" to get deals done when the macroeconomic outlook is clouded with uncertainty, said Liam Timoney, Private Equity partner, to S&P Global Market Intelligence. He added that earnouts are "heavily negotiated and it's significant chunks of the potential consideration."