Given the growth in the use of earn-outs as a mechanism for both closing deals and addressing post-transaction performance uncertainties, Duff & Phelps has published its first 2012 Contingent Consideration Study. The study analyzed 120 transactions that included earn-outs and closed between 2009 and 2011. The study:
- analyzes earn-out structures and durations,
- compares the magnitude of earn-outs to upfront payments,
- discusses trends in connection with the fair value of earn-outs and the related impact of valuation updates on earnings volatility, and
- identifies differences in earn-out structures and valuation by industry.
This study is a must read for anyone contemplating the use of contingent consideration in an acquisition.
