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In mergers and acquisitions, the announced purchase price, such as a company acquiring another for ten million dollars, can sometimes be misleading as it may not be a fixed amount. This is where earn-outs come into play. An earn-out is a contingent payout agreement that allows the shareholders of the target company (Company B) to receive additional payments if certain financial goals are met after the acquisition. For example, the acquiring company might agree to pay ten million dollars upfront, but if Company B achieves a net income of two million dollars in the following year, an extra five hundred thousand dollars would be added to the total payout. Thus, the final payment could exceed the initial amount.