Valuing contingent consideration using option pricing

December 2011
  • Print-friendly version
Valuing contingent consideration using option pricing

At a glance

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.

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.