Accounting for earnouts in M&A transactions

In the world of mergers and acquisitions, earnouts (also formally known as a contingent consideration) can be a useful tool to help bridge the valuation gap between a buyer and seller in the negotiation phase of a transaction. With supply chain issues, labor shortages and rising costs continuing to impact the current market, many M&A advisors are turning to earnouts to help close a deal.

Although they can help salvage a transaction, accounting for earnouts can raise some frustration for both the…