Valuing contingent consideration using option pricing


December 2011

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Including an "earn-out" or contingent consideration in an acquisition lets buyers tie payment to future performance. However, fair value accounting for contingent consideration involves significant challenges. Reprinted by permission from:

Including an "earn-out" or contingent consideration in an acquisition lets buyers tie payment to future performance. However, fair value accounting for contingent consideration involves significant challenges.

PwC provides a comprehensive and technically detailed discussion of Valuing contingent consideration using option pricing in this complimentary publication. This paper is authored by the Financial Analytics & Derivatives team, which explores the challenges of valuing contingent consideration and proposes an approach that we have found effective.