Financing acquisitions with earnouts

• 成果类型: Article
• 署名作者: Bates, Thomas W.; Neyland, Jordan B.; Wang, Yolanda Yulong
• 署名单位: Arizona State University; Arizona State University-Tempe; George Mason University; University of Melbourne
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2018.08.002
• 发表日期: 2018
• 关键词: Credit conditions; Trade credit; FIRMS; constraints; INVESTMENT; cash; INFORMATION; decisions; discounts; liquidity

摘要

We present evidence that earnout agreements in acquisition contracts provide a substantial source of financing for acquirers. Acquirers in transactions with earnouts are significantly more likely to be financially constrained, face tighter credit market conditions, and use less debt and equity to fund acquisitions. Financially constrained acquirers also book lower fair values for the contingent claim. Earnout use is more likely in transactions that involve liquid sellers, and earnout bids garner higher transaction valuation multiples. Overall, the evidence suggests that earnouts are an economically material and increasingly common source of acquisition financing for acquirers with limited access to external capital.