Abstract
This article explains what problems dealmakers face when valuing companies and how can contingent payment instruments (such as earn-outs) facilitate them in this task. It provides an analysis of economic and business specifications of earn-outs and demonstrates on a sample of 48 transactions that the use of earn-outs is influenced by the characteristics of the target’s industry and market.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
References
SRS Acquiom (2015) 2015 SRS Acquiom M&A claims study. an analysis of post-closing activity in private-target M&A deals. http://www.dallasbar.org/sites/default/files/2015%20SRS%20Acquiom%20-%20Dallas%20Presentation.pdf
Bruner RF (2004) Applied mergers and acquisitions. Wiley, Hoboken. Wiley finance series. xxvi. pp. 609–636. ISBN 0-471-39506-4
Cain MD, Denis DJ, Denis DK (2010) Earnouts: a study of financial contracting in acquisitions agreements. J Acc Econ Forthcoming 6, 31. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=899094
Creely C, James MD, Lardner F (2009) Bridging the purchase price gap in business acquisitions. Bloomberg Finance L.P. https://www.foley.com/files/publication/aac59407-4004-44c3-8394-861cca58e165/presentation/publicationattachment/f33bc842-9655-410a-9599-86528110e483/pricegap.pdf
Crimmins PM, Ben G, Waller J (2009) Earn-outs in M&A transactions key structures and recent developments. M&A Journal: Independent Report Deals Dealmakers. https://www.mayerbrown.com/Files/Publication/5b829276-5f8b-4a5a-ad5f-a492e73d6574/Presentation/PublicationAttachment/a5e9717d-c9d1-4c00-be87-828ef83e4776/Earn-outs_MA.pdf
Europe Economics (2015) Earnouts in mergers and acquisition transaction. http://www.europe-economics.com/userfiles/library/M&A_Earnout.pdf
Hale WCP, Dorr LLP (2017) WilmerHale M&A report. https://www.wilmerhale.com/uploadedFiles/Shared_Content/Editorial/Publications/Documents/2017-WilmerHale-MA-Report.pdf
Mergermarket D (2017) Navigating the model deal process: closing the deal. Mergermarket database
Mergermarket database (2018) Mergermarket Limited 2018 (03879547 UK) http://www.mergermarket.com/info/
Quinn BJM (2013) Putting your money where your mouth is: the performance of earnouts in corporate acquisitions. Boston College Law School Legal Studies Research Paper No. 251. pp. 15–30 SSRN: https://ssrn.com/abstract=1958617 or http://dx.doi.org/10.2139/ssrn.1958617
Walton L, Kevin DK (2007) Purchase price adjustments, earnouts, and other purchase price provisions. http://apps.americanbar.org/buslaw/newsletter/0035/materials/pp1_2.pdf
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Nature Switzerland AG
About this paper
Cite this paper
Nistorenco, T. (2019). Earn-Outs: Mitigating Risk and Bridging Value Expectations in M&A. In: Procházka, D. (eds) Global Versus Local Perspectives on Finance and Accounting. ACFA2018 2018. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-11851-8_34
Download citation
DOI: https://doi.org/10.1007/978-3-030-11851-8_34
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-11850-1
Online ISBN: 978-3-030-11851-8
eBook Packages: Economics and FinanceEconomics and Finance (R0)