Understanding Valuing Contingent Consideration

When negotiating the purchase price of a business, Contingent Consideration is often used to bridge the price gap between what the seller would like to receive and what the buyer would like to pay. More generally, a portion of the purchase consideration may be contingent on the outcome of future events. For example, additional consideration may be paid if the acquired business meets certain targets (such as future revenue, margin, or profit targets), passes regulatory reviews, has successful litigation outcomes, meets covenants, or completes product development.

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