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Discussion: Financing acquisitions with earnouts

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  • Erel, Isil

Abstract

“Financing Acquisitions with Earnouts” by Thomas Bates, Jordan Neyland, and Yolanda Wang broadly focuses on an important topic: how firms finance their acquisitions. Specifically, authors study the role of earnout agreements in financing acquisitions and show that they could be substantial both for financially constrained firms and at times when external capital is more expensive. My discussion focuses on the economic significance of the results presented, questioning the importance of earnouts in the world of M&As and discussing the role of financing synergies in general.

Suggested Citation

  • Erel, Isil, 2018. "Discussion: Financing acquisitions with earnouts," Journal of Accounting and Economics, Elsevier, vol. 66(2), pages 396-398.
    • Handle: RePEc:eee:jaecon:v:66:y:2018:i:2:p:396-398
    DOI: 10.1016/j.jacceco.2018.08.003
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    References listed on IDEAS

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    1. Isil Erel & Yeejin Jang & Michael S. Weisbach, 2015. "Do Acquisitions Relieve Target Firms’ Financial Constraints?," Journal of Finance, American Finance Association, vol. 70(1), pages 289-328, February.
    2. Officer, Micah S., 2007. "The price of corporate liquidity: Acquisition discounts for unlisted targets," Journal of Financial Economics, Elsevier, vol. 83(3), pages 571-598, March.
    3. Cain, Matthew D. & Denis, David J. & Denis, Diane K., 2011. "Earnouts: A study of financial contracting in acquisition agreements," Journal of Accounting and Economics, Elsevier, vol. 51(1-2), pages 151-170, February.
    4. Cain, Matthew D. & Denis, David J. & Denis, Diane K., 2011. "Earnouts: A study of financial contracting in acquisition agreements," Journal of Accounting and Economics, Elsevier, vol. 51(1), pages 151-170.
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    Cited by:

    1. Monaco, Eleonora & Ibikunle, Gbenga & Palumbo, Riccardo & Zhang, Zeyu, 2022. "The liquidity and trading activity effects of acquisition payment methods: Evidence from the announcements of private firms' acquisitions," International Review of Financial Analysis, Elsevier, vol. 82(C).
    2. 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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