: The Harvard Law School Corporate Governance Blog
CVRs ? A Bridge Too Far?
By Harvard Law School Program on Corporate Governance
Editor?s Note:Daniel Wolf is a partner at Kirkland & Ellis LLP focusing on mergers and acquisitions.
In a recent M&A Update we addressed the practical challenges of using earnouts in private company M&A to bridge the final valuation gap in sale negotiations. An equally daunting set of obstacles applies to the implementation of the public M&A version of earnouts ? Contingent Value/Payment Rights (CVRs). We use the term CVRs to refer to a variety of techniques that provide public company target shareholders with valuation protection or additional consideration based on post-closing events. This protection can take several forms:
Contingent Value Rights - not such a big deal There's a healthy interest in contingent value rights (CVRs) as acquisition currency. Chatterjee and Yan have a good paper on the use of CVRs in acquisitions, Innovative Securities under Asymmetric Information...
More on Genzyme's CVR For those of you looking for an example of a publicly traded contingent value right agreement, you can download the Genzyme/Sanofi CVR here. Some may think that publicly traded CVRs are going to the be the wave of the future...
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