Module V· Contribution Analysis & Shareholder DilutionAdvanced
Question
How do earn-outs and contingent consideration affect effective ownership and contribution analysis?
Answer
Earn-outs can shift economics after closing, so headline ownership may not equal effective value sharing. Model base consideration, probability-weighted earn-out, maximum payout, and dilution if paid in stock. In contribution analysis, show ownership before and after contingent payments and test whether target shareholders' final value aligns with their contribution and performance delivered.