Case Studies in Contingent Consideration

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Training Event Transcripts
September 16, 2020
Antonella Puca, CFA, CPA/ABV, CEIV, CVA
Brett Hickey
Shaun Maloney, CPA, CFA, ABV, CEIV, CFF, CGMA
fair value for financial reporting
fair value, monte carlo, option price modeling, the appraisal foundation (TAF), valuation methodology, american institute of certified public accountants (AICPA), earnings before interest, taxes, depreciation, amortization (EBITDA), systematic risk, unsystematic risk, black scholes option pricing model, contingent consideration, revenue, earnout

Summary

A significant component of the transaction price in an M&A or buyout transaction often consists of proceeds that are “contingent” upon the target company’s achievement of certain performance targets after the closing has taken place. From the perspective of the seller, “contingent consideration” represents the right to receive additional assets or equity interests from the buyer (earnout), or the obligation to return part of the proceeds from the transactions (clawback) if specified future events occur or conditions are met. Join Shaun Maloney and Antonella Puca, for an overview of the valuation of contingent consideration, based on the guidance of The Appraisal Foundation in VFR No. 4 Valuation of Contingent Consideration, the AICPA Guide on the Valuation of Portfolio Investments of Venture Capital and Private Equity Funds and Other Investment Companies, and other best practices. With a discussion of the basic characteristics and different types of contingent consideration and how to select a suitable valuation approach depending on the underlying metric and nature of the contingency, attendees receive practical, step-by-step examples of how to implement the ASA and AICPA guidance in specific circumstances along with illustrative examples how to apply option pricing and Monte Carlo simulation in a number of case studies. The webinar will be introduced by a conversation with Brett Hickey, Founder and CEO of Star Mountain Capital, who will provide a unique perspective from the investment side on M&A activity in the middle market and how earnouts are being negotiated in the current environment.
Case Studies in Contingent Consideration
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