👉 Background: Natura&Co is the Brazilian cosmetics group that has been around since 1969 and owns three cosmetics brands including The Body Shop. They were also the owners of the lux Aussie brand Aesop, which they sold to L'Oreal earlier this year.

👉 What happened: Natura&Co has been searching for a potential buyer for The Body Shop for a while now. And, they've just locked in a deal to sell The Body Shop to private investment firm Aurelius Group in a £207 million deal.

👉 What else: The Body Shop's sales haven't quite been flying. In fact, they have declined 12% year on year. So to balance the deal, the agreement with Aurelius includes an earn-out of £90 million.

What's the key learning?

💡In an acquisition, an earn-out can bridge the gap between what the buyer is willing to pay and what the seller is willing to accept.

💡Here's how it works: the buyer promises to pay the seller extra payments in the future, if certain conditions are met. Usually, those conditions are to achieve a certain target revenue or profit figure.

💡For the buyer, it means they only pay the additional amount if the business is succeeding, and it shows the buyer that the seller is confident in the future of the business. As for the seller, it means the prospect of an increase in the total sale price. Win-win!