This case was designed to serve as a basis for student discussion on the use of contingent forms of payment in M ​​& A. The protagonist in the case, the buyer and must respect the conditional payment (“earn-out”), the to protect the buyer if the rosy future does not occur, nor reward the seller if it works design. Students are completed discounted cash flow (DCF) where assessment of the target (Digitech) under both the seller’s and buyer forecasts, which reveal a wide gap in valuatio … Read more »

This case was designed to serve as a basis for student discussion on the use of contingent forms of payment in M ​​& A. The protagonist in the case, the buyer and must respect the conditional payment (“earn-out”), the to protect the buyer if the rosy future does not occur, nor reward the seller if it works design. Students are completed discounted cash flow (DCF) valuations of the target (Digitech) under both the seller’s and buyer given the forecasts that show a wide gap in the ratings. The protagonist tries to bridge this gap through a combination of fixed and variable payments to the seller. Two different designs are proposed earnout in the case. Students must simulate the value of the earn-out to determine the expected value of this estimate from the standpoint of both the buyer and seller.
This is a Darden case study.
«Hide

from
Scott Siegler
Source: Darden School of Business
13 pages.
Publication Date: Sep 30, 1999. Prod #: UV0087-PDF-ENG
Printicomm proposed acquisition of Digitech: Negotiating Price and Payment HBR case solution