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Earnouts in mergers and acquisitions: a systematic literature review of a contingent payment mechanism

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  • Niklas Dahlen

    (HHL Leipzig Graduate School of Management)

Abstract

Defining the deal value in mergers and acquisitions is inherently complex and often constitutes an inflection point for the parties involved. By paying part of the deal value at a later stage according to predefined goals, earnouts are intended to alleviate information asymmetries and help bridge valuation differences. Despite their wide application in practice, research on earnouts remains fragmented. This study presents the first systematic literature review of earnouts, mapping the scattered research landscape by analyzing 64 papers published between 1970 and 2023. The review categorizes the body of earnout research into three distinct streams: the motives for employing earnouts, their implications, and the nuances of their contractual arrangements. Based on this synthesis, research gaps are identified that present a comprehensive road map for future research. This study enables investors to employ earnouts more successfully and guides scholars to pursue further earnout research based on its holistic overview.

Suggested Citation

  • Niklas Dahlen, 2025. "Earnouts in mergers and acquisitions: a systematic literature review of a contingent payment mechanism," Management Review Quarterly, Springer, vol. 75(3), pages 2107-2146, September.
    • Handle: RePEc:spr:manrev:v:75:y:2025:i:3:d:10.1007_s11301-024-00429-w
    DOI: 10.1007/s11301-024-00429-w
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    Keywords

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    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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