How much is the mixed bid worth at closing?
What are the maximum and expected equity proceeds at the shown share price, assuming the deal closes?
The question
Bid B offers $90m in cash and 2m buyer shares. Buyer shares trade at $10. A $12m earnout pays only if a milestone is met after close. Assume a 50% chance of meeting it if the deal closes.
“What are the maximum and expected equity proceeds at the shown share price, assuming the deal closes?”
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Choose your approach
What would you do here? Open the move you’d make.
Treat the $12m earnout as cash at closing.
Tempting, but it misses something. The milestone might never be met. The $12m is the cap, while $6m is the expected payout given close.
Mark the shares at $20m and weight the earnout by 50%.
The strong move. A fixed share count exposes sellers to price changes. An earnout depends on an agreed milestone.
See how a strong candidate says it
“At this share price, the maximum is $122m. Expected proceeds given close are $116m, including $6m of expected earnout.”
Why it works: A fixed share count exposes sellers to price changes. An earnout depends on an agreed milestone.
Step 2: Mark the stock
What would you do here? Open the move you’d make.
Multiply the fixed share count by the current share price.
The strong move. Two million buyer shares at $10 are worth $20m.
Hold the stock value fixed when the price moves.
Tempting, but it misses something. A fixed share count leaves the value exposed to the share price.
See how a strong candidate says it
“Two million buyer shares at $10 are worth $20m.”
Why it works: A fixed share count leaves the value exposed to the share price.
Step 3: Estimate the contingent payment
What would you do here? Open the move you’d make.
Use the chance of meeting the milestone given close.
The strong move. The $12m cap times 50% gives a $6m expected earnout given close.
Use the chance the deal closes to price the milestone.
Tempting, but it misses something. Closing and meeting the earnout milestone are distinct events.
See how a strong candidate says it
“The $12m cap times 50% gives a $6m expected earnout given close.”
Why it works: Closing and meeting the earnout milestone are distinct events.
Step 4: Report both values
What would you do here? Open the move you’d make.
Report the maximum and expected value separately.
The strong move. At $10 per share, the maximum is $122m and the expected value given close is $116m.
Present $122m as proceeds the seller can count on.
Tempting, but it misses something. The maximum assumes a full earnout at the stated share price.
See how a strong candidate says it
“At $10 per share, the maximum is $122m and the expected value given close is $116m.”
Why it works: The maximum assumes a full earnout at the stated share price.
The answer, in short
- Decision
- At this share price, the maximum is $122m. Expected proceeds given close are $116m, including $6m of expected earnout.
- Because
- A fixed share count exposes sellers to price changes. An earnout depends on an agreed milestone.
- What would change it
- A fall to $8 per buyer share lowers expected proceeds given close to $112m.
Common traps
- Treat the $12m earnout as cash at closing.
Check your answer
- Did I state which values and assumptions I used?
- Mark the stock?
- Estimate the contingent payment?
- Report both values?
Last reviewed Nov 10, 2026