A look across the big pond and into the abyss — Performance of earnout deals in Europe and in times of crisis

Niklas Dahlen, Yannik Dittmann and Maximilian Schreiter

Finance Research Letters, 2025, vol. 75, issue C

Abstract: Earnout deals are expected to protect acquirers from overpayment as information asymmetries are reduced and the final purchase price is partly based on the future performance of the target. Various scholars have investigated the perception of earnout deals by capital markets revealing significant abnormal returns. Those studies are focused mostly on the Anglo-Saxon countries and China leveraging a pre-COVID datasets. Hence, this study aims at investigating capital market reaction to earnout deals in Continental Europe covering the timeline of 2012 to 2022. Our results indicate that earnout deals in Continental Europe outperform non-earnout deals and are especially beneficial in times of high uncertainty.

Keywords: Earnout; Contingent payments; Contingent claims; Abnormal returns; Event study; Mergers and acquisitions (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:75:y:2025:i:c:s154461232401715x

DOI: 10.1016/j.frl.2024.106686

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