Peter Rayney reviews the impact of Covid-19 on earn-out arrangements.
Negotiations for the sale of a company or business often reveal a gap between the seller’s asking price (often based on future financial performance!) and the purchaser’s view of its value. The purchaser will argue that the anticipated results have not been delivered and therefore the deal value of the ‘target’ company/business should be based on its most recent accounts and perhaps a cynical view of its projected profits.
This difference in valuation expectations is often referred to as the ‘price-gap’, and is normally reconciled through the use of appropriate earn-out arrangement.
Basic tax treatment
The case of Marren v Ingles [1980] STC 500 firmly established that the market value of a right
