Earnouts in Healthcare Transactions: Bridging the Valuation Gap, Minimizing Stark and AKS Risk

Structuring Clauses to Protect Buyers and Sellers and Reduce Post-Closing Disputes

Recording of a 90-minute CLE video webinar with Q&A

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Conducted on Thursday, July 27, 2023

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Course Materials

This CLE webinar will guide healthcare attorneys on earnouts in healthcare transactions. The panel will examine the components of a well-structured earnout and discuss best practices for designing earnouts to minimize disputes. The panel will also address the risks, including potential violation of Stark and the Anti-Kickback Statute (AKS). The panel will offer guidance for structuring earnout provisions.

Description

M&A transactions routinely include earnout provisions as a valuation-bridging mechanism to alleviate concerns by both parties about tendering or receiving a fair purchase price. Earnouts can allow either an upward price adjustment post-closing--when sufficient value is created to justify a higher purchase amount--or innovative financing for an originally agreed upon price. Further, earnouts can deter disagreements during the negotiation of the deal price only to result in post-closing disputes over the earnout itself.

While earnouts are a beneficial tool for parties in M&A deals, such provisions come with additional risks in healthcare M&A transactions. Such provisions could implicate the Stark Law or AKS. Buyers and sellers need to carefully navigate valuation and purchase price issues in healthcare transactions and draft earnout provisions accordingly.

Listen as our authoritative panel of healthcare attorneys examines earnouts in healthcare transactions. The panel will examine the components of a well-structured earnout and discuss best practices for designing earnouts to minimize disputes. The panel will also address the potential risks, including violation of Stark and AKS. The panel will offer guidance for structuring earnout provisions.

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Outline

  1. Earnout provisions in healthcare M&A
    1. Advantages and disadvantages of earnouts
    2. Considerations
    3. Components
  2. Risks
    1. AKS
    2. Stark
  3. Best practices for structuring earnout provisions

Benefits

The panel will review these and other challenging issues:

  • What risks should counsel keep in mind when determining whether to use earnout provisions in healthcare deals?
  • What post-closing concerns should buyers and sellers anticipate and address during deal negotiations?
  • What are best practices counsel should employ when designing earnouts to minimize disputes?

Faculty

Liffrig Molife, Nicole
Nicole A. Liffrig Molife

Counsel
Latham & Watkins

Ms. Liffrig Molife’s practice focuses on healthcare transactions and regulatory counseling matters. She advises...  |  Read More

Vernaglia, Lawrence
Lawrence W. Vernaglia

Partner
Foley & Lardner

Mr. Vernaglia is the Department Chair for the firm’s Industry Teams Department, responsible for overall strategy...  |  Read More

Zall, Richard
Richard J. Zall

Partner
King & Spalding

Mr. Zall advises healthcare companies, investors and lenders in their most challenging transactions, including...  |  Read More

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