SRS Life Sciences M&A Study Shows Earn-Out Milestones Achieved and Paid

First-of-its-kind Study Demonstrates that Earn-out Negotiation and Post-Closing Management have a Powerful Impact on Investor Returns

SAN FRANCISCO--()--The road to a life science M&A exit may be long and sometimes complicated, but it often leads to real earn-out payments, according to data released today. SRS | Shareholder Representative Services, the post-closing expert for private-company mergers and acquisitions, today announced the release of the 2012 SRS Life Sciences M&A Study, which analyzes deal terms, investor returns, and earn-out milestones and achievement rates for life sciences M&A. The study takes an in-depth look at four years of SRS deals in the bio-pharmaceutical and medical device sectors and aims to arm dealmakers with robust, reliable information that can’t be found elsewhere.

The new study, with data on over 200 milestone events, is the first of its kind. In addition to over 50 data points on a variety of topics, it reveals that 36% of milestone events due by now have been achieved and paid to shareholders. Another 36% have been missed and not paid, with the remainder delayed.

“Earn-outs aren’t going away, so it is essential to understand best practices for negotiating and managing them,” said Karl Handelsman, Managing Director at CMEA Capital, who is involved in multiple SRS deals. “SRS' M&A study is a great new resource for the life sciences community.”

Additional findings from the study include:

  • 83% of SRS’ life sciences deals involve earn-outs, whereas only 15% of SRS deals in other sectors involve earn-outs.
  • The life sciences deals included in the study represent more than $16 billion of stated deal value, including more than $7 billion in potential earn-out payments. However, less than half of these earn-outs are tied to milestones that sellers project may be achieved within four years of the acquisition.
  • SRS data reveals no ‘typical’ or ‘model’ deal structure in terms of multiples of return on equity capital invested. Upfront payments range from less than 1 to more than 15 times equity capital invested, and potential earn-outs also vary widely.
  • In deals where the buyer has missed or projected missing a milestone, a legal or business dispute has ensued nearly half of the time. The most common source of controversy is a delay in a development program.

“Many of our most important new drugs, devices and other life sciences products are being developed and commercialized under these M&A agreements involving long term earn-outs,” said Donald Morrissey, Executive Director and head of SRS' Life Sciences Practice. “We want to help all involved make better, data-driven decisions on these business matters, just as they do on their scientific and medical programs.”

The full 2012 SRS Life Sciences M&A Study is available on the SRS web site,

About SRS

SRS | Shareholder Representative Services is the global expert in professionally managing the post-closing process to safeguard the selling shareholders' interests in private company M&A transactions. As the shareholder representative, SRS manages all post-closing matters, including working capital and other purchase price adjustments, tax reviews, earn-outs, the handling of claims, disputes and litigation, communications with acquirers and selling shareholders, and management and distribution of escrow and expense funds.

SRS has a senior-level team of more than 35 attorneys, financial professionals, and operations and systems experts and the most sophisticated operational, tracking and reporting systems ever used by a shareholder representative. On deals comprising $50+ billion in aggregate deal value, SRS has represented more than 400 venture capital and private equity firms and over 40,000 shareholders in 44 countries. No one has as much knowledge and experience in serving as a shareholder representative and navigating the issues that arise post-closing as SRS. For more information visit


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Kelly Holman, 212-209-3844, Ext. 1012

Release Summary

SRS | Shareholder Representative Services, the post-closing expert for private-company mergers and acquisitions, today announced the release of the 2012 SRS Life Sciences M&A Study.


BackBay Communications
Kelly Holman, 212-209-3844, Ext. 1012