Module V· Consideration Mix & Earn-OutsBasic
Question
What are the main forms of consideration in an M&A deal, and how do they differ economically?
Answer
Main forms are cash, stock, debt assumption, seller notes, earn-outs, rollover equity, and contingent value rights. Cash gives certainty but uses liquidity or debt capacity. Stock shares future upside and dilution. Earn-outs bridge valuation gaps but create complexity. Rollover equity aligns sellers with future performance. The mix affects risk allocation, EPS, leverage, tax, and control.