With valuations still mismatched and bank lending slow to recover, US private equity purchasers will have to turn to alternative techniques such as earn-outs and seller financing to bridge the gap in 2010.
Earn-outs push deals through by drafting target clauses into the purchase agreement. If a buyer thinks that a company is worth 10% less than the seller, then it will negotiate paying 90% up front. The final 10% is only...