Preparing for a recession in turbulent times

Market volatility and rapid technological change are putting pressure on CFOs’ planning efforts as they navigate fresh uncertainties — from tariffs affecting supply chains to AI rollouts and growing competition for talent. 

At an American City Business Journals virtual roundtable last week, the CFO of workforce technology provider Magnit and the vice president of finance and strategy at kitchen products company Made in Cookware suggested ongoing scenario planning is essential.

“As I think about challenges today —  beyond AI and technology — we've got this uncertainty in the markets with tariffs and seeing customer pullbacks,” said Rudy Gonzalez, CFO of Folsom, California-based Magnit. “As a CFO, you have to be a utility player.”

CFOs should plan for optimization and recovery, including how to manage debt if interest rates rise. They should also anticipate customer churn, he added.

Jimmy Du, vice president of finance and strategy at Austin-based Made in Cookware, said the company has been running scenario plans for some time. Systemic events in recent years — including the COVID-19 pandemic and bank failures — can affect cash and revenue projections, and companies need to pivot, he argued. Now, the company is assessing the fallout from trade tariffs.

“Tariffs, to some degree, are outside of our control, but we're asking our manufacturers to share the cost,” he said. The company is scrutinizing expenses, including headcount, processes and warehouse operations — while working to retain inventory and meet growth targets. It’s also looking for ways to offset tariffs while keeping operational expenditures tight.

Amid lingering inflation and high financing costs, return on investment “has to be held to a higher standard” than just a few years ago, Gonzalez said.

Holding on to cash to invest in growth

Magnit, after paying down debt, built a cash “war chest” that allowed it to invest in automation and agentic tools to offset wage inflation, Gonzalez said. 

Made in Cookware said it hasn’t made major changes to its allocation strategy in response to economic pressures, but as an inventory-heavy business, maintaining the flow of payments to suppliers is a priority, Du said. The company has frozen hiring and accelerated cost–cutting measures. 

Cost savings, including from the back office, will be redeployed to marketing, which the company sees as a critical growth driver. 

“Marketing spend is probably the last thing I would touch, as long as it's spent efficiently and at the right metrics — all of the savings that we make are then redeployed to drive growth,” said Du. 

Managing AI adoption

Both companies are cautiously optimistic about the role of artificial intelligence in streamlining tasks across finance and the broader workforce. Made in Cookware is testing the use of AI to automate tasks, including invoice tagging. 

While using AI to drive efficiency is appealing, companies should weigh the benefits of an enterprise platform against a patchwork of point solutions, which can be less attractive “because it's hard to get the ROI when you're duplicating costs and have to build integrations,” Gonzalez said.

Companies also need to consider how much human oversight AI-generated output requires, particularly around data privacy, he added.

Panelists also discussed how CFOs can attract top talent to their firms, with remote work and quicker career development paths acting as possible inducements for up-and-coming professionals.

Remote work “opens the door to talent that's not right by a physical office, and that used to be a limiting factor for companies,” Gonzalez said. Remote work also opens up opportunities to bring in talented candidates who are based outside the U.S., he added.

Many real estate investment trusts have applied lessons learned from the 2008 financial crisis to manage their present balance sheets more prudently and put them in a good position to weather the current economy’s headwinds, Prologis CFO Tim Arndt said. 

Among the hallmarks of that playbook: low leverage, pushing debt maturities out when possible and a focus on liquidity, he said. That approach, Arndt said, has left the industrial real estate company Prologis prepared to both seize on opportunities and protect itself amid the current uncertainties stemming from the Trump administration’s April 2 tariff barrage. 

“We manage the balance sheet across the cycles both for opportunities and to prepare for these disruptions and in that regard we’re already prepared,” Arndt told CFO Dive in an interview Friday. 

What does that financial preparation exactly look like? For starters, while some companies have access to just one credit line that matures every five years, Arndt said Prologis carries three different credit lines, each with roughly 30 banks in them, and overlapping and staggered maturity lines that Prologis seeks to leave largely untapped. 

“So tomorrow I could draw down $6 billion and do something with it,” said Arndt. “That’s tremendous flexibility.” 

The setup keeps Prologis in the bank markets more frequently, but he said it reduces the risk of needing capital from banks at a single time where there could be a disruption.  

The company is also a high-grade issuer of debt, he said, which enables it to borrow at anywhere from 15- to 40-year terms, compared to 10-year terms for lower-rated companies. As of March 31, its credit ratings were A and A2 from Standard & Poor’s and Moody’s, respectively, according to the company’s Q1 2025 filing with the Securities & Exchange Commission.  

Arndt, who took over as CFO in 2022, spoke about his company’s debt strategy and outlook as the industrial real estate market is said by some to be, along with retail, one of the real estate sectors most exposed to tariffs and their potential affects on the supply chain.

On the company’s Q1 earnings call, Arndt outlined the uncertainty that tenants are faced with while also asserting that a “disconnected world” shifting away from globalization will require more warehouses and potentially increase demand for industrial space. 

Asked in the interview to elaborate on his view, he said that his comment was effectively a “directional” one. In an imagined world where there’s no more global trade, each region would need to have space for the entire supply chain: sourcing raw materials, manufacturing goods, storing finished goods, and distributing them. 

However, he said Prologis, with a portfolio of warehouses focused on the consumption end of the supply chain, is sticking with that business model and not betting that large amounts of manufacturing will return to the U.S. and create demand for the different elements of the supply chain long-term. 

“We don’t believe, from principally the cost and complexity of supply chains that will need to be built in the U.S., that we are going to see significant amounts of production come on shore,” Arndt said, noting that a substantial rise in manufacturing has not occurred since the first Trump administration initiated the higher tariff paradigm. 

For now, one gauge the company is keeping a watch on to get a sense of the tariffs’ impact is the utilization rate inside its warehouses, which has not deviated in the U.S. from the roughly 85% typical longer-term norm. It’s still early, he said, “but we’re watching it carefully anyway because it’s a good predictor. You want high utilization in your buildings.”  

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The trade war between China and the United States is escalating. With tariff policies changing by the week, and sometimes by the hour, it’s a volatile time for the international trade community.

Here’s what you need to know. 

What are the China tariffs?

As of April 9, 2025, products of China and Hong Kong are subject to a 125% reciprocal tariff, a 20% tariff to address the threat of illicit drugs, and the Section 301 tariffs implemented prior to 2025, which range from 7.5% and 100%.

For select products, the total tariff is 245%.  However, on April 22, President Donald J. Trump indicated that he’ll lower the 145% punitive tariff “substantially.” Details have yet to be announced.

10% tariff implemented February 4

The U.S. imposed a 10% tariff on China starting at 12:01 a.m. ET on February 4, 2025. This 10% tariff is on top of the existing Section 301 tariffs on Chinese imports and applies to products of Hong Kong as well.

The executive order didn’t provide for drawback, and there was no stated exclusion process.

20% tariff implemented March 4

On March 3, President Trump doubled the 10% China tariff. The 20% tariff applies to products of China and Hong Kong entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. ET on March 4, 2025.

Reciprocal tariffs implemented April 9, then increased

On April 2, President Trump said the U.S. would impose an additional 34% reciprocal tariff on China starting April 9, 2025, at 12:01 a.m. ET. The 34% included the new baseline 10% tariff that applies to all countries as of April 5.

On April 8, after China announced retaliatory tariffs on U.S. imports, the U.S. increased the 34% tariff to 84%. The 84% duty took effect at 12:01 a.m. ET on April 9. 

Then, on April 9, Trump said he was raising the tariff on China to 125%, effective immediately. Per his executive order, the 125% replaces the 84% previously announced and also applies to products of Hong Kong and Macau. The 125% tariff took effect at 12:01 a.m. on April 10.

China responded by increasing tariffs on U.S. goods from 84% to 125%.

As the tariffs are stackable, products of China are subject to the following:

• Section 301 tariffs implemented prior to February 1, 2025 (various rates ranging from 7.5% to 100%)

• 20% tariff implemented March 4, 2025

• 125% reciprocal tariff as of April 10, 2025

The grand total for most products of China is more than 145%. A White House fact sheet dated April 15, 2025, notes that “China faces up to a 245% tariff on imports to the United States.” The 245% tariff applies to electric vehicles and syringes.

There are some exclusions. Goods not subject to the reciprocal tariff include:

• Articles subject to 50 USC 1702(b)
• Bullion
• Copper, pharmaceuticals, semiconductors, and lumber articles
• Energy and certain minerals that are not available in the United States
• Steel/aluminum articles and autos/auto parts already subject to Section 232 tariffs, and all articles that may be subject to future Section 232 tariffs

Drawback is available with respect to the reciprocal tariffs. U.S. Customs and Border Protection (CBP) is publishing updated guidance as it can.

Smartphones and other products exempted from reciprocal tariffs

On April 11, the White House announced exceptions to the reciprocal tariffs on China. Affected products include electronics such as computers, semiconductors, and smartphones.

Updated guidance from CBP states that the 125% reciprocal tariffs do not apply to select merchandise entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. ET on April 5, 2025. Importers may request a refund of duty paid before this exclusion was provided. 

The guidance from the CBP and the White House includes a list of Harmonized Tariff Schedule of the United States (HTSUS) codes for the affected products. The 20% tariff implemented March 4 continues to apply to these products.

What’s changing with de minimis imports from China?

The United States is eliminating de minimis for China and Hong Kong starting May 2, 2025. The Secretary of Commerce was said to be considering whether to extend these rules to packages from Macau. However, CBP guidance published on April 18 doesn’t reference Macau.

The de minimis exemption provided by 19 U.S. C. § 1321(a)(2)(C) (aka Section 321 shipments) allows one shipment of goods (per person, per day) valued at or under $800 to enter the U.S. free from duty and import taxes. This will remain in effect for other countries, as far as we know now.

But CBP will reject requests for de minimis entry and clearance for ineligible shipments of products of China and Hong Kong.

You can continue reading this post here. 

Five years after the pandemic normalized remote work, companies are still wrestling with the pros and cons of requiring employees to return to offices. For CFOs, a strategic approach to office space and RTO goes hand in hand with prudent budgeting. 

That’s because, for many companies, office real estate remains the second-largest expense, following payroll, whether “it’s being used or it’s not,” Andrew Farah, CEO of workplace analytics company Density said. It’s up to a company’s leaders to make the tough decision to either use it or lose it — in order to avoid shelling out for empty space.

“The main question is, should you try to get your employees back into an office, or should you let your physical space go?” Farah said in an interview. For CFOs, who tend to consider real estate in terms of numbers, answering the RTO question can come down to the simple question of utilization: “if you have a real estate portfolio that's not being used, get rid of the buildings or require people to come back,” Farah said.

Utilization refers to how often and effectively employees are making use of a space: a good meeting room utilization rate, for example, is between 40% to 60%, according to a 2024 post by workplace software firm Envoy.

The San Francisco, California-based company provides workplace analytics software and sensors aimed at enabling companies to gain insight into how their real estate is being utilized, according to its website. Farah has served as Density’s CEO since May 2014, and previously served as a managing partner for software development agency Rounded, according to his LinkedIn profile.

The ‘de facto’ remote pitfall

The office space question has continued to loom large in the minds of CFOs and other C-suite leaders, as many high-profile companies — as well as the federal government under President Donald Trump — have begun to issue return to office mandates.

Many of the RTO policies that have been enacted this year have triggered pushback from both company employees and even executives, some of whom themselves prefer hybrid or remote work, CFO Dive previously reported.

That could be partially due to wishy-washy guidance from top-line leadership: many C-suite leaders are unwilling to be strict about RTO policies “for fear of attrition or the inability to recruit, Farah said, “so what they do is they just choose not to have a policy,” he said. “Or they say we're hybrid, which actually means many things. Hybrid is a terrible term. It's imprecise, it's vague,” and Farah said it’s often left to managers to execute.

In such cases, “hybrid” companies often turn into “de facto” remote companies, he said — with the business still footing the cost of real estate.

Fixing the ‘movie theater’ problem

As well as unclear guidance, many executives can often have a murky idea regarding exactly how the office spaces they do have are really being used by their employees — a question distinct from occupancy. For CFOs as the stewards of finance, figuring out if the space is being put to effective use is a critical factor in determining an RTO policy, especially in the midst of rising cost pressures.

Businesses that are implementing RTO policies have also found themselves facing both logistical and financial challenges, such as pricey office refurbishments to entice employees that can strain an already tight budget or a shortage of necessary supplies such as desks and WiFi access, March reports by Raconteur and NPR found.

Underutilized buildings tend to have what Farah calls the “movie theater problem,” where, entering into an empty theater, patrons “naturally spread out,” he said. “They don’t sit next to each other.” A similar pattern emerges in underutilized offices, where, lacking critical mass, employees will fill the space they’re in, but “for a CFO, it's just dollars being spent on space that's not being used,” Farah said.

As such, many “CFOs are turning to their heads of real estate and expecting hard data on utilization,” Farah said. Finding out key numbers — such as exactly how much the business is spending per head — can help finance chiefs make targeted decisions regarding if “you're going to grow some places [or] you're going to consolidate [in] others,” he said.

With finance and accounting talent shortages among the biggest workforce challenges cited by CFOs, some finance chiefs report that they are playing a bigger role in finding and hiring workers to staff their teams, according to an April 28 article from Big Four firm Deloitte.

The increased involvement is just part of the evolving strategy for bolstering the workforce, as roughly a third (34%) of finance leaders said they were taking a larger role in the hiring process, while 35% said they were bringing in employees from other departments as reinforcements and turning to external human resource firms to identify candidates, according Deloitte, citing data from the company’s Q1 2025 North American CFO Signals survey.  

Because CFOs understand the inner-workings of their finance department, it makes sense for finance chiefs to be more involved. “The hands-on approach — effectively, CFO as the chief human resources officer of finance — might help finance chiefs get the right candidates in the right seats,” Deloitte states. ​​​​

The one-two punch of retiring certified public accountants and a shrinking pipeline of younger people choosing the field has galvanized momentum to bring more people into the accounting profession by easing CPA licensure requirements. To date, at least 11 states have passed legislation that removes the 150-hour-rule hurdle which effectively requires candidates to complete a fifth year of college to obtain a license, CFO Dive previously reported. 

Increasingly, finance departments are also turning to technology, including automation and AI, to fill finance skills gaps. Nearly eight in 10 (79%) finance chiefs surveyed said it is likely that they’ll use generative AI in the coming 24 months “to bridge skills gaps,” according to the report from Deloitte executives led by Steve Gallucci, national managing partner, US CFO Program. 

However, the Q1 survey found some potential challenges may be in store, with 48% of finance chiefs citing staff resistance to using new technology as their biggest challenge in meeting C-suite expectations.  

Meanwhile, CFOs are anxious about the impact of the talent shortage on the workers they do have, as well as their companies. The biggest talent pipeline-related worry was about the increased workload shouldered by existing workers, cited by 44% of CFOs, followed by the fear of a loss of credibility with institutional or private investors, cited by 42%, and concern about the eroding the board’s confidence in finance, cited by 41%. 

“Such consequences can put CFOs squarely in the hot seat,” Deloitte said, noting that only 15% of respondents said their organizations are not experiencing a shortage of accountants or other finance talent. 

The Deloitte article highlighting the workforce talent shortage that CFOs are grappling with did not include broader survey findings related to the respondents’ outlook on the broader economy, which is often part of the regular quarterly survey. Last month, a Deloitte spokesperson said the company had at that time opted not to release the traditional report due to changes in the economic environment that occurred after the survey was fielded in February. The company did not respond to requests for further comment on the report.

Deloitte’s Q4 2024 Signals report showed a sharp jump in executive optimism, with 72% of the 200 finance chiefs surveyed projecting an improved economy in a year, compared to 19% in the previous quarter.

Historically, chief revenue officers mainly focused on driving sales and revenue growth. Today, CROs are front and center when it comes to such areas as financial planning, investor relations, pricing strategies and forecasting, according to Irina Wolpert, a leader with the executive search firm Egon Zehnder. 

As businesses have become more complex and market dynamics have shifted over the last three to five years, the responsibilities of the CRO have expanded to “just encompass a much broader set of strategic and operational functions,” Wolpert said. 

That leaves CROs nudging up against CFOs’ typical remits, an evolution that comes both with potential points of tension as well as greater opportunities to create success for their businesses.

“Both roles are incredibly critical and in fact have to coexist and partner in order for the company to have a long-term, sustainable growth agenda,” Wolpert, who serves as leader, financial services, tech & fintech practice groups at Egon Zehnder, told CFO Dive in an interview.

Weighing risk versus growth  

One of the newer entrants to the C-suite, the CRO position began to gain ground as companies — especially startups in the technology and software spaces — increasingly focused on high growth, according to a 2015 article by VentureBeat.

The position, which could also be occupied by a “chief experience officer,” or “chief growth officer,” is “tasked with creating a single revenue engine — from lead generation in digital marketing to closing the sale,” a 2023 write-up by McKinsey said. “The CRO’s role goes beyond sales and marketing to the entire market landscape, customer journey, and strategic expansion plans.”

As such, one of the main areas of tension between a CRO and CFO tends to be that “balance of risk versus growth,” Wolpert said. CFOs tend to have a more conservative approach, focused on risk management and financial stability, while CROs “are typically incentivized to take much more calculated risks to achieve more aggressive revenue targets,” she said. 

“Typically, where we see the tension is, number one in the area of resource allocation,” Wolpert said. “If you think about the traditional role of the CRO, typically they tend to push for more resources to drive sales and revenue growth. The CFOs, rightfully so, are typically much more focused on budget constraints.”

Prior to joining the Zürich, Switzerland-based leadership advisory firm, Wolpert served as global head of sales enablement and go-to-market strategy for e-commerce company Amazon, according to her LinkedIn profile.

A former professional ballet dancer turned business executive, Wolpert also served a 15-year span at American Express in various roles including as head of sales enablement and marketing and VP, global sales enablement.

While the two positions can tussle over growth versus stability, both the CRO and the CFO are morphing into more strategic leaders within the C-suite.

“Given how both roles have evolved, these two critical roles can actually build a much stronger partnership than they ever could in the past,” Wolpert said. In order for businesses to achieve their goals, that collaboration is critical, she said.

“When I think about strategic planning at the end of the day, you need both functions to focus on revenue growth and they have to be completely in alignment on their financial goals,” Wolpert said. “And I think you need a very strong CFO and a very strong CRO to really come together and think about a business strategy that ultimately drives growth and profitability.”

Broadening the path to the CEO seat  

A strong relationship between CFOs and CROs — both of which typically report to the CEO — can also help top executives to more smoothly execute on their business strategies, balancing “financial frugality” with a customer-centric approach to growth and revenue, Wolpert said. As such, both CFOs and CROs are becoming more “viable contenders” for the role of the CEO, she said.

In her view, the CRO is in a slightly better position to assume the top executive seat, as those executives have a “comprehensive” view of the businesses’ entire revenue ecosystem and so, they naturally develop “a very deep understanding of how various parts of the organization ultimately work together to achieve [a] common objective,” she said.

Finance chiefs are also emerging as more popular candidates for the CEO chair, however — and for those companies which are examining their CFOs for such a role, it’s important to invest in honing the operational leadership and other key skills of their finance chiefs outside of finance, Wolpert said.

Some companies approach this by crafting “an intentional path for the CFO to step into a chief operating officer role or a divisional CEO role” within the same company, she said, enabling them to develop their operational skills.

“I also think… the most successful CFOs who ultimately become CEOs, not only do they bring the kind of operating chops and experience running other parts of the organization, but they have really cultivated tremendous relationships with the board, with their peer set,” Wolpert said.

President Donald Trump’s fast-changing tariff decisions have set the stage for global supply chain disruptions that could lead to increased vendor fraud, according to fraud prevention experts.

The current environment could provide an opening for fraudsters as companies rushing to mitigate the potential risks of Trump’s tariffs experience upheaval in their supply chains and relationships with third-party vendors, experts told CFO Dive.

“Fraudsters can try to take advantage of the fact that many companies don’t have the right processes in place for working with new vendors, especially when it comes to handling bank accounts and payments,” Baptiste Collot, CEO of fraud prevention firm Trustpair, said in an interview.

Nine in 10 U.S. companies last year were targeted by cyber fraud activities, representing a 14% increase over 2023 levels, according to a Trustpair report released in February. The surge is largely driven by fraudsters’ rapid adoption of artificial intelligence, which has made it easier for them to generate highly convincing impersonations and social engineering attacks, the report said.

Such scams can include impersonations of vendors. Nearly 70% of surveyed companies were targeted by vendor fraud last year, up from 47% who said this a year earlier.

The problem is only expected to worsen as fraudsters continue to leverage advanced technologies and exploit avenues such as supply chain disruptions, the study found. One in four respondents said that supply chain or third-party relationship changes will most likely lead to a higher risk of payment fraud at their organizations this year.

The risks have substantially escalated in the months since Trustpair released its report, as the Trump administration’s trade and tariff policies have thrown businesses into shock and desperation, according to Lee-Ann Perkins, a treasury professional who contributed to the study.

“We assumed with the new presidency that we would see changes such as tariffs coming in, but this has happened so quickly and almost overnight,” she said in an interview, adding that tariff-fueled supply chain disruptions are creating “a fertile ground for vendor fraud.”

There’s a rush to “ensure you get as many products as you can before any tariffs go into effect and onboard new suppliers quickly,” she said. “You basically have desperation to avoid any financial impact from the tariffs, but teams are not as focused on who they’re paying. It’s a less obvious but increasingly dangerous side effect of all the global trade disruptions and economic uncertainty.”  

The situation is reminiscent of the COVID-19 pandemic, which triggered “very urgent vendor sourcing and payment pressures for companies,” Perkins added.

Trustpair’s research found that payment fraud is taking a bigger financial toll on companies. Nearly 60% of respondents said the financial impact of payment fraud in 2024 was over $5 million compared to just a quarter who said this in the year prior, a more than three-fold spike.

Steps such as automating vendor verification procedures and bank account validations are key, according to the report.

“It’s not always front of mind for CFOs or other leaders in the organization, but operational urgency and weak controls are definitely a recipe for fraud, and it’s exacerbated in a time of distress,” Perkins said.

President Donald Trump’s shifting tariff policies have added substantial uncertainty to the merger-and-acquisition landscape, making financial forecasts and valuations much more challenging, according to a report by global law firm Mayer Brown.

The current environment “significantly magnifies the importance of robust trade due diligence as part of any M&A transaction,” according to the report released Tuesday.

“I think now more than ever the legal team and the finance team need to be on the same page as they weigh these risks and take them into account in the valuation process,” Peter Wolf, a partner at Mayer Brown and one of the report’s authors, said in an interview. “You can’t just rely on the historical financial statements of a company, because those simply don’t reflect the business being conducted in today’s tariff environment.”

The current uncertainty mirrors the instability dealmakers experienced during and shortly after the COVID-19 pandemic, when earnout provisions in transactions became increasingly common to bridge valuation gaps, according to the report. An earnout is a payment the seller receives from the buyer only when specific performance targets are met.

“Without clearly defined accounting standards and metrics, even minor classification differences in tariff costs can determine whether earnout targets are achieved, potentially triggering significant financial consequences and post-closing disputes,” the report said.

U.S. M&A activity showed a mixed picture in March, with large transactions helping to drive an increase in overall deal value over the year-earlier period, but volume falling amid continued economic and policy uncertainty, according to an Ernst & Young analysis.

“Mega-deals,” particularly in the technology and consumer product sectors, pushed the overall value of deals above $100 million to $217 billion, a 25% increase from the year-earlier period. But last month saw a total of 112 deals, a decline of 8.9% year-over-year.

“The coming months will be pivotal for M&A activity as market participants seek clarity and stability in an evolving regulatory environment,” the EY report said. “As such, we see a guarded approach towards M&A activity across most sectors.”

The U.S. has begun negotiations with several nations that on April 9 were granted a 90-day reprieve from high reciprocal tariffs, according to the White House. Baseline tariffs of 10% on goods from most U.S. trade partners remain in place, as do 145% duties on imports from China.

During a White House news event Tuesday, Trump signaled a further softening in his trade approach, saying the high tariffs his administration has imposed on Chinese goods will “come down substantially, but it won’t be zero.”

Because the administration’s position on tariffs is constantly evolving and many countries have threatened to impose retaliatory tariffs, due diligence in M&A dealmaking has become “extremely challenging and somewhat speculative,” according to the Mayer Brown report.

“Uncertainty is sort of the dealmaker’s worst enemy,” Wolf told CFO Dive. The current environment in particular “makes it extremely hard to properly evaluate the going-forward financials of a business with a global supply chain,” he added.

A dealmaker can bridge buyer-seller valuation gaps by tying part of the purchase price to an earnout or another type of contingent payment that hinges on the performance of the business, Wolf said. 

“Earnouts often seem like a great solution to dealmakers, but the big risk is that they result in a lot of disputes between the parties over whether the earnouts were achieved,” he said. “The easiest way to avoid litigation is to clearly define how the earnout is going to be calculated.”