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Notes - Asset Purchase - «Earn-Out» Formula
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Documents
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Notes - Achat d'entreprise - Formule... Notes - Achat d'entreprise - Formule «Earn-Out»
Y04055 -
Quebec French Civil law Unannotated$14.99
$14.99
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Notes - Asset Purchase - «Earn-Out»... Notes - Asset Purchase - «Earn-Out» Formula
Y04055a -
Quebec English Civil law Unannotated$14.99
$14.99
Notes - Asset Purchase - «Earn-Out» Formula
When transferring a business by means of a share purchase, the sale price of the shares is often the element on which the success of the transaction depends. On the one hand, the seller does not want to undervalue the business and, on the other hand, the buyer hesitates to speculate on the projected value of the business.
To prevent a deadlock, the parties sometimes agree to a two-part method of valuation to determine the sale price. The first part represents the base price for the business; the second part is a type of performance bonus that varies depending on the company's financial performance and may sometimes include a ceiling price. This part of the sale price, known as the “earn-out”, is contingent on certain results being realized.
However appealing it may seem, this kind of valuation method is not necessarily appropriate for all share purchase transactions, and it requires certain essential elements to achieve the desired result with a minimum amount of difficulty.
The ideal context in which to use this valuation method is when the seller retains control of operations throughout the period during which the “earn-out” calculation of the sale price applies. It is not recommended when the seller hands over control of the business to the purchaser, because the seller no longer has direct control over its performance.
Notes - Asset Purchase - «Earn-Out» Formula
Notes - Asset Purchase - «Earn-Out» Formula
Notes - Asset Purchase - «Earn-Out» Formula
-
Documents
-
Notes - Achat d'entreprise - Formule... Notes - Achat d'entreprise - Formule «Earn-Out»
Y04055 -
Quebec French Civil law Unannotated$14.99
$14.99
-
Notes - Asset Purchase - «Earn-Out»... Notes - Asset Purchase - «Earn-Out» Formula
Y04055a -
Quebec English Civil law Unannotated$14.99
$14.99