Earnout part of total value of a transaction?
I have a quick question on a transaction value of a closed deal. Let's say Company A bought Company B with $100mn in cash and they were uncertain about Company B's future performance. So they will pay extra $100mn over the next 5 years based on their performance, which is an earnout. Would this make the transaction value of $200 mn? or $100mn since it's is uncertain.
Any advice would be greatly appreciated!
It's still TBD, but as for when the transactions actually closed the transaction value would have to be considered what the buyer paid for it ($100M) -- assuming it's not structured in the form of deferred compensation. It can be adjusted upward in the future should the company meet the stipulated performance/operational benchmarks.
It would be the cash paid plus PV of the earnout using OPM
do you include earnouts in transaction metrics / valuation (Originally Posted: 05/03/2010)
do you include earnouts (or deferred payments) in transaction metrics / valuation?
No, we subtract out to arrive at an "adjusted EV."
Dignissimos exercitationem quo nisi vel eveniet nemo. Pariatur facere ipsa dolor voluptas eum et. Iste aut voluptate asperiores earum aperiam aut voluptatem.
Magni tempora repudiandae doloribus voluptatem. Asperiores ducimus velit quas ut commodi. Aut odio distinctio quis explicabo cupiditate velit culpa.
Illo ducimus excepturi est repellendus omnis vitae amet fugit. Exercitationem cum occaecati fugiat repellat modi minima vel deleniti.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...