And earn-outs are in. So says a new survey looking at almost 500 European deals from 2007-08 (most below $500m). As I wrote:
“The balance of power in European mergers and acquisitions (M&A) has shifted towards buyers, with deals containing more legal safeguards against a purchase turning sour, a survey released on Tuesday showed.
“The survey, by lawyers and accountants CMS, found more deals now contain ‘earn-out’ or ‘material adverse change’ clauses to protect buyers, and they often get longer to assess if a business is all it was promised to be.”
There was a bit of jiggery-pokery with the figures – the comparison periods were seemingly changed arbitrarily across categories, in order that the biggest difference possible emerged. Nonetheless, they highlight a trend:
* 17 percent of deals in the fourth quarter of 2008 contained earn-outs, which vary purchase prices depending on a target business’s future performance. That compared to 9 percent in the first half of 2008.