Ask Joey ™ a Question

What are examples of consideration in an acquisition?

Consideration means the same thing as purchase price. If you ever get into mergers & acquisition, you’ll realize that a company almost never pays 100% cash when they buy another business. As the example below illustrates, there are a number of ways other than cold hard cash that can be transferred to the seller in an acquisition.

For example, if Double Eagle Ventures acquired another company for $10,000,000 of stock issued, $3,000,000 of cold hard cash, and earnouts (contingent consideration) with a fair value of $2,100,000, then total consideration paid to the seller would be $15,100,000.


You might also be interested in...

  • Are acquisition/transaction costs capitalized or expensed?

    For book purposes, US GAAP requires a company to expense transaction costs in the period incurred. Under tax purposes, a company may be allowed to capitalize transaction costs and amortize over the useful life of the asset or a determined period. Examples of acquisitions costs include fees to 3rd party legal, accounting, and tax firms. […]