When PepsiCo acquired Poppi, the headline price was $1.95B, plus a potential earnout of up to $300M. That extra payment depends on Poppi hitting undisclosed goals by the third quarter of 2027.
In a recent regulatory filing, PepsiCo valued the potential earnout at just $12 million as of September 5, down from $117 million in June and $278 million in December.
That’s a big swing. But it’s worth being precise about what it means. This is an accounting estimate, not a final result. The measurement period isn’t over, and PepsiCo says Poppi is still growing and gaining share.
Still, it’s a useful moment to talk about how earnouts work, and how to structure them well.
Why earnouts exist
Earnouts bridge valuation gaps. The seller believes in the brand’s growth. The buyer wants to see it before paying for it. A well-built earnout lets both sides get a deal done and share in the upside.
Here’s what we walk every founder through before agreeing to one.
1. Your payout depends on a business you no longer run.
After closing, the buyer sets budget, pricing, hiring, and marketing. That’s normal since they own the business but it means every lever behind your payout sits with someone else, so your protections need to be in the contract.
2. Alignment has to be designed.
The best earnouts make both sides win or lose together. If the brand performs, the buyer earns more and pays more. If it doesn’t, both share the downside. The structure to avoid is one where the buyer can do well overall while the earnout metric declines.
3. Definitions drive the payout.
How “revenue” or “EBITDA” is defined matters enormously. So do overhead allocation, shared sales teams, and how your product is positioned alongside the buyer’s other brands. These are legitimate business decisions for the buyer, and they can still move the earnout. Address them upfront.
4. Clarity prevents disputes.
Earnouts are among the most litigated terms in M&A, usually because the contract left room for different interpretations. Courts generally enforce what’s written, so the agreement is where your protections need to live.
5. Protections worth negotiating:
→ Tie the earnout to revenue rather than Adjusted EBITDA (fewer judgment calls)
→ Include operating covenants around budget, sales support, and customer diversion
→ Secure audit rights and a clear dispute resolution process
→ Add acceleration if the product line is sold, merged, shut down, or deprioritized
→ Keep the measurement period as short as practical
A note on Poppi
I have no inside knowledge of this deal and I’m not suggesting anything improper happened. Many factors affect a brand’s performance after an acquisition. The point is broader: earnout outcomes are shaped by how the terms are written.
Our thoughts
Value the deal primarily on cash at close and treat the earnout as upside. Then negotiate the terms that give that upside a fair chance to pay out.
