Accounting for Earnouts in M & A Transactions
By Aaron Partridge , CPA Shareholder , Doeren Mayhew
In the world of mergers and acquisitions , earnouts ( also formally known as a contingent consideration ) can be a useful tool to help bridge the valuation gap between a buyer and seller in the negotiation phase of a transaction . With the ongoing COVID-19 pandemic and economic uncertainty that remains in our current market , many M & A advisors are turning to earnouts to help close a deal .
Although they can help salvage a transaction , accounting for earnouts can raise some frustration for both the buyer and seller if not clearly defined in the purchase agreement .
6 VIEWpoint Issue 1 | 2021