M&A transactions: Mechanisms of bridging the valuation gap

M&A transakce: Mechanismy překlenutí rozdílného ocenění kupujícího a prodávajícího

Lukáš Hruboň

Oceňování, 2023, vol. 16, issue 1-2, 40-57

Abstract: Against a background of increasing economic uncertainty, parties to an M&A transaction may arrive at very different valuations of an acquisition target. This article describes basic methods attempting to bridge the valuation gap as follows: (i) deferring part of the purchase price of the M&A transaction following future developments, (ii) phased acquisitions. In an illustrative example, the author shows the theoretically plausible application of the earn-out mechanism, which takes into consideration future financial performance of the target company.

Keywords: M& A; Mergers & acquistions; Corporate valuation; Valuation gap; Earn-out; Staged / phased acquisitions; Fúze a akvizice; Oceňování podniku; staged / phased acquisitions (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.18267/j.ocenovani.289

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