Healthcare Services Group has agreed to acquire NexDine Hospitality for approximately $93.5m, plus contingent consideration payable if certain performance conditions are met after closing.
The agreement was signed on 6 October and announced the following day.
According to the source, the headline price is only part of the story. Contingent consideration is measured at fair value at the acquisition date and, when classified as a liability, remeasured at each reporting date, meaning changes in the outlook for the acquired business can reach the income statement long after the deal closes. The source also notes that customary adjustments to the price have to be tracked through to the final purchase price allocation.
The source states that smaller and mid-sized acquisitions are where this tends to be overlooked, and that the earn-out schedule, the assumptions behind it and the review dates belong in the close calendar from day one rather than as a note in the deal file.