Hobbers Yes, I am certain the earn-out bonus will be $10.5 million if Bertram makes $8 million in ebitda. So yes, in that situation EGD takes a loss on the division for that particular year, but as hollabread is trying to explain, the earn-out bonuses are really just the price of buying the company. EGD ends up being able to spread the cost over 3 yrs, and as an added bonus 2/3 of the total purchase price ends up being tax deductable, since it's being expensed.
As shareholders, we should be hoping that EGD ends up paying the the full $31.5 million in earn-outs, because that will mean that EGD has puchased an asset for $46.5 million that throws off a minimum of $8 million in earnings annually. As far as I'm concerned, anytime you can buy something for 5 1/2 times earnings, you have a bargain indeed.
It's unfortunate that the way this transaction was structured led to a certain amount of investor & analyst confusion, but once you examine the transaction carefully, it becomes clear that it's a great deal for EGD. Fred is no fool, if this deal wasn't good for the company he wouldn't have done it, plain & simple.
If you are a patient investor, you'll reap the rewards of this transaction. The market is not going to wait til 2014 to recognize it's value.
GL all.