Designing M&A agreements

Maik Piehler

2008

The purchase price of the target company plays a key role during M&A transactions. However, buyers and sellers often have different information about the company's value. M&A negotiations are therefore frequently terminated due to price disagreements. This begs the question of whether it is possible to design M&A agreements in such a way as to overcome differences in the assessed value of the company.

Using a formal model, author Maik Piehler examines how much the standard tools of cash and share deals can contribute to making M&A agreements better. He demonstrates that further improvement is possible by using options and debt. Piehler also describes the conditions under which earn-out agreements can be used to bridge the differences in valuation. He also outlines recommendations for putting these ideas into practice.

The book is geared toward academics and business students who specialize in investment and financing. It is also recommended for managers and consultants who handle M&A transactions for industrial companies and banks.