Earn-out structures in European biotech deals: what Recall surfaces
Across 184 anonymised acquisition agreements with European biotech targets, what milestone types, efforts standards and dispute mechanisms look like, and what Review does with that.
Fifty-eight per cent of the earn-out clauses in our sample use “commercially reasonable efforts” as the standard the buyer must meet, and in most of those the phrase is not defined. That was the first thing the aggregated counts showed, and it set the tone for the rest.
This note describes what Recall surfaces about earn-out structures across the matter histories of firms that opted into aggregated analysis. It is an internal observation, not a market survey, and the caveats at the end are not decorative.
Sample and method
Fourteen firms allowed us to run an aggregation query across their own Recall indexes. The query identified acquisition agreements (share purchase agreements, asset purchase agreements, and licence agreements with an acquisition option) signed between 2021 and 2025 where the target was a biotechnology company headquartered in Europe and the consideration included a contingent element. Each firm’s index returned structured counts: milestone type, duration, efforts standard, acceleration triggers, dispute mechanism, information rights, set-off, and cap. No clause text left any tenant. We received fourteen tables of counts and added them up.
The combined sample is 184 agreements. Swiss, German, Nordic and UK firms contribute most of it. The targets skew to pre-commercial companies with one or two lead programmes, which is where contingent consideration is most common.
Milestones, duration and share of consideration
Regulatory milestones alone (investigational approval, start of a trial phase, marketing authorisation) appear in 44% of agreements. Commercial milestones alone (net sales thresholds, first commercial sale) appear in 17%. Both appear in 39%, typically with regulatory milestones front-loaded and sales thresholds at the end.
Median earn-out duration is six years from closing, with a range from three to twelve. Agreements with sales milestones run longer, as you would expect, since the sales period cannot begin until approval.
The contingent element is a large share of headline consideration. The median across the sample is 55% of maximum total consideration, and the share has risen across the five years: agreements signed in 2021 cluster around 45%, those signed in 2025 around 62%. Within our sample, buyers have been shifting risk towards sellers, and sellers have been accepting it with more structure around the buyer’s obligations.
Caps are nearly universal: 89% of agreements cap the earn-out, with the median cap at 1.8 times the upfront payment.
Efforts, acceleration and disputes
The efforts standard is where the drafting effort concentrates. “Commercially reasonable efforts”, undefined, appears in 58%. A defined “diligent efforts” standard, usually benchmarked against what a similarly situated company would do for a product of similar potential at a similar stage, appears in 31%, and its share has grown each year. A bare “reasonable efforts” appears in 11%, mostly in earlier agreements and smaller deals.
Acceleration provisions are less common than sellers’ counsel might hope. Acceleration on the buyer’s change of control appears in 47% of agreements. Acceleration or a deemed-achievement payment on the buyer’s abandonment of the programme appears in 29%. Agreements with a defined diligence standard are much more likely to carry both.
Set-off is the buyer’s mirror image: 66% of agreements allow the buyer to set indemnity claims against earn-out payments, and in half of those the set-off is unrestricted pending resolution, which in practice gives the buyer a lever that sellers rarely appreciate at signing.
Disputes about the calculation go to expert determination in 52% of agreements, to arbitration in 38%, and to courts in 10%. Disputes about whether the buyer met its efforts obligation almost always go to arbitration or court; expert determination is for arithmetic.
Information rights: quarterly reporting on milestone progress in 70% of agreements, annual in 22%, and an audit right in 60%. Sellers in agreements without information rights have, in our observation, the hardest time establishing that a diligence obligation was breached.
What Review does with this
A firm’s playbook can encode what it considers acceptable in each of these dimensions, and Review flags against it. Across the active playbooks of the fourteen firms, the most common High flags on earn-out clauses are an undefined efforts standard where the firm acts for the seller, unrestricted set-off, and the absence of any acceleration trigger. The most common Medium flags are duration longer than the firm’s default and information rights at annual frequency only.
Draft, when composing for a seller, now defaults to the defined-diligence formulation if the firm’s precedents contain one, and cites the matter it came from.
Caveats
Fourteen firms is not the market. The firms using ZAAN skew to particular jurisdictions and to corporate practices of a certain size. Biotech in southern and eastern Europe is barely represented.
Counts are only as good as segmentation. Recall identifies earn-out clauses well in agreements with headings and less well in agreements without; some clauses were certainly missed and a few non-earn-out contingent payments were certainly included.
Signing year is not the same as negotiation year, and the 2021 figures include deals shaped in 2020.
Nothing here says what a particular seller should accept. It says what, across these firms’ histories, sellers have accepted, which is a different and more modest thing.