Selling Owners Who Don't Leave: Seller Notes & Earn-Outs in LBOs

In a leveraged acquisition, a seller may look like they have fully exited the business after closing. But economically, many selling owners do not truly leave. By retaining rights like seller notes, earn-outs, warrants, indemnity rights, or rollover equity, former owners simply transition into junior creditors or contingent claimants. When the business later struggles, the dispute often turns on exactly where those retained rights sit in the post-closing capital stack.

In this video, we break down:

How a seller's retained economics transform into post-closing credit instruments backed by guarantees, as seen in Frankel v. ICD Holdings S.A.

The hard truth of the capital stack in Mullins v. TestAmerica, where a subordinated seller note was left unpaid after senior acquisition financing took priority during distress

Why the practical value of an earn-out depends entirely on the entity that owes it and the distribution restrictions placed by senior lenders, illustrated by Levine Leichtman v. InterDent

The mechanics of subordination agreements, and why sellers like BAE Systems are blocked from enforcing their notes when senior lenders begin exercising remedies

Watch to see why you should never stop at the label "seller," and how to analyze the true priority, obligor, and remedy of a retained economic right in a leveraged transaction.

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Видео Selling Owners Who Don't Leave: Seller Notes & Earn-Outs in LBOs канала Transactional Law Press