Earnouts are much in favor these days, thanks to a tough economy that makes it harder for sellers and buyers to agree on a valuation.
For example, King of Prussia, Pa., e-commerce company GSI Commerce Inc. is acquiring VC-backed Retail Convergence Inc. in a deal valued at up to $350 million. GSI will pay $180 million at closing, consisting of half cash and half stock and an additional sum up to $170 million through a three-year earnout period. See The Deal Pipeline (subscription required) for more deal terms and the
rationale for the acquisition.
The uptick in earnouts as a solution for
valuation gaps has generated a lot of comments. Among them: a recent Corporate Dealmaker post, in which BDO Consulting partner Jeffrey M. Katz noted the rise in post-acquisition disputes due to earnouts.
Now we hear from managing directors Alan Mayer and Chris Hammond of investment bank Green Manning & Bunch Ltd., who give us their take on
earnouts versus seller financing.
Also, from The Deal Pipeline, Sullivan & Cromwell LLP M&A partners Frank Aquila and Melissa Sawyer say
contingent value rights should be in the toolbox when the buyer and seller cannot agree on price. -
Baz Hiralal
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Juergen Lasowski
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