Oceňování 2023, 16(1-2):40-57 | DOI: 10.18267/j.ocenovani.289

M&A transactions: Mechanisms of bridging the valuation gap

Lukáš Hruboň
Znalec ve specializaci Oceňování podniků

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.
JEL classification: G34

Published: March 20, 2024  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Hruboň, L. (2023). M&A transactions: Mechanisms of bridging the valuation gap. Oceňování, 16(1-2), 40-57. doi: 10.18267/j.ocenovani.289
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. [1] Allen & Overy a další (2022): Rekordní rok fúzí a akvizic, Ekonom 06, 2022. str. 24.
    2. [2] Christian Toll (2017): Earn-outs to bridge gap between negotiation parties - curse or blessing?, Managerial Economics 18(1):103, January 2017, AGH University of Science and Technology Press, ISSN 1898-1143, [on-line]: https://www.researchgate.net/publication/320080416_Earn-outs_to_bridge_gap_between_negotiation_parties_-_curse_or_blessing Go to original source...
    3. [3] CMS (2020): The Earn-out - Is this the new normal in M&A? [on-line], https://cms.law/en/gbr/publication/the-earn-out-is-this-the-new-normal-in-m-a-part-one-earn-outs-bridging-valuation-gaps[4] Corporate Finance Institute - CFI: Valuation gap [on-line], https://corporatefinanceinstitute.com/resources/knowledge/valuation/valuation-gap/
    4. [5] DePamphilis D. (2005): Mergers, Acquisitions, and Other Restructuring Activities. Los Angeles, Elsevier Academic Press, 2005
    5. [6] Hruboň L. (2017b): Násobek EV / EBITDA: kvantifikace veličiny EBITDA, Oceňování, číslo 3/2017, ISSN 1803-0785
    6. [7] Hruboň L. (2022): Lukáš Hruboň: M&A transakce: Úvod, role ocenění, Oceňování, číslo 3/2022, ISSN 1803-0785 Go to original source...
    7. [8] Mařík, M. aj. (2007): Metody oceňování podniku: Proces ocenění, základní metody a postupy. 2. vydání. Praha, Ekopress, 2007. ISBN 978-80-86929-32-3 Go to original source...
    8. [9] McKinsey & Company (2005): Valuation - Measuring and Managing the Value of Companies. New Jersey, John Wiley & Sons, Inc., 2005

    This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content