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Save that deal using Earn‐outs
Author(s) -
Frankel Michael E. S.
Publication year - 2004
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.20084
Subject(s) - ask price , construct (python library) , payment , business , actuarial science , risk analysis (engineering) , computer science , finance , programming language
How do you resolve the “bid‐ask spread” between buyer and seller in an acquisition? One common tool is the earn‐out—a payment contingent on events and performance after the deal has closed. Earn‐outs can be a powerful tool. But it is vital that you consider the risks carefully. The author explains how to construct earn‐outs that minimize the risk of future disagreement and litigation. © 2005 Wiley Periodicals, Inc.