M&A Activity -- Expect a Surge in Mergers

Why Accept Anything Other Than Cash?

Buyers are motivated to use earnouts because they may fear that shareholders, who now have bulging bank accounts and who are staying on to manage the company, will lose their motivation for profit performance or will suddenly decide to take their money and leave the company to play golf. Buyers may also propose a seller-financing component because the purchase price is not totally financible through conventional sources.