Edward Hamilton Featured in Accounting Today: Best Practices for Valuing Contingent Consideration

Edward Hamilton, CFA, senior vice president in Valuation Research Corporation’s (VRC) Princeton office was featured in Accounting Today discussing impacts of the recently released Appraisal Foundation exposure draft, Valuation of Contingent Consideration.

Hamilton notes, “Historically, many earnouts were valued using the amount implied by the deal model. However, for earnouts where the payment is “asymmetric,” meaning there are ceilings and floors to the payments, the expected forecast may not yield the expected earnout payment.” Hamilton also shares examples to highlight current best practices using an option-based approach based on financial metrics such as revenue or EBITDA.

VRC continues to see many transactions where contingent consideration has been present. Additionally, deal structures and valuation methods continue to evolve.

A copy of the article is available on the Accounting Today website.