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Analyzing the likelihood and the impact of earnout offers on acquiring company wealth gains in India

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  • Kohli, Reena
  • Mann, Bikram Jit Singh

Abstract

The study seeks to assess the likelihood and impact of earnout offers on the acquiring company wealth gains in cross border acquisitions in India. The study highlights two cases where earnouts are preferred choices of the acquirer. Firstly, in those cases where the target company is in hi-tech and services sector employing high level of intangible assets that are difficult to value. Secondly, in those cases where the acquirers are mature and already have some international exposures. The results of the event study indicate that earnout offers create significantly higher wealth gains compared to the cash offers only and not the stock offers.

Suggested Citation

  • Kohli, Reena & Mann, Bikram Jit Singh, 2013. "Analyzing the likelihood and the impact of earnout offers on acquiring company wealth gains in India," Emerging Markets Review, Elsevier, vol. 16(C), pages 203-222.
    • Handle: RePEc:eee:ememar:v:16:y:2013:i:c:p:203-222
    DOI: 10.1016/j.ememar.2013.05.004
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    1. Zhu, PengCheng & Jog, Vijay & Otchere, Isaac, 2014. "Idiosyncratic volatility and mergers and acquisitions in emerging markets," Emerging Markets Review, Elsevier, vol. 19(C), pages 18-48.
    2. Zaiyang Xie & Runhui Lin & Jie Mi & Na Li, 2019. "Improving Enterprises’ Cross-Border M&A Sustainability in the Globalization Age—Research on Acquisition and Application of the Foreign Experience," Sustainability, MDPI, vol. 11(11), pages 1-19, June.
    3. Faff, Robert & Prasadh, Shyaam & Shams, Syed, 2019. "Merger and acquisition research in the Asia-Pacific region: A review of the evidence and future directions," Research in International Business and Finance, Elsevier, vol. 50(C), pages 267-278.
    4. Dahlen, Niklas & Lahmann, Alexander & Schreiter, Maximilian, 2024. "Panacea for M&A dealmaking? Investor perceptions of earnouts," Finance Research Letters, Elsevier, vol. 60(C).

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