M&A transactions: Mechanisms of bridging the valuation gap[M&A transakce: Mechanismy překlenutí rozdílného ocenění kupujícího a prodávajícího]

Against a background of increasing economic uncertainty, parties to an M&A transaction may arrive at very different valuations of an acquisition target. This article describes basic methods attempting to bridge the valuation gap as follows: (i) deferring part of the purchase price of the M&A transaction following future developments, (ii) phased acquisitions. In an illustrative example, the author shows the theoretically plausible application of the earn-out mechanism, which takes into consideration future financial performance of the target company.