Archive for September, 2009

Earn-Outs Can Help Reach Middle Ground on Price Value


There’s an interesting article published recently about “earn-outs,” by merger-and-acquisition guru Scott Lochner.

What’s an Earn-Out?
According to Lochner, “If there is disagreement about the business value of a company whose assets or shares of stock are being potentially purchased and sold in an M&A transaction, it is common to include an “earn-out” provision as a portion of the purchase consideration.”

An “earn-out” is basically a payment for work and performance after a deal is closed. For example, if a seller believes the value of a company is $55 million or more and the buyer thinks it’s worth only $50 million, than the gap in purchase consideration is five million dollars.
That $5 million gap can be closed with an “earn-out,” or a contract that allows the seller to earn up to that $55 million or more if the business sold performs on an agreed target (financial or non-financial) over an agreed amount of time. (more…)

How the World is Going Solar Without Us

By: Thomas L. Friedman, columnist for The New York Times

Applied Materials is one of the most important U.S. companies you’ve probably never heard of.  It makes the machines that make the microchips that go inside your computer.  The chip business, though, is volatile, so in 2004, Mark Splinter, Applied Materials’ CEO, decided to add a new business line to take advantage of the company’s nanotechnology capabilities- making the machines that make solar panels.

The other day, Splinter gave me a tour of the company’s Silicon Valley facility, culminating with a visit to it’s “war room,” where Applied maintains a real-time global interaction with all 14 solar panel factories it has built around the world in the past two years.  Not a single one is in America.  Five are in Germany, four are in China, one is in Spain, one is in India, one is in Taiwan and one is even in Abu Dhabi.

The reason all these other countries are building solar-panel industries today is because most of their governments have put in place the three perquisites for growing a renewable energy industry:

  1. any business or homeowner can generate solar energy;
  2. if they decide to do so, the power utility has to connect them to the grid; and
  3. the utility has to buy the power for a predictable period at a price that is a no-brainer good deal for the family or business putting the solar panels on their rooftop.

That is what Germany put in place, and that explains why Germany now generates almost half the solar power in the world today and, as a byproduct, is making itself the world-center for solar research, engineering, manufacturing and installation.  With more than 50,000 new jobs, the renewable energy industry in Germany is now second only to its auto industry.