.... However, the transition to a separated organizational structure must coincide with the sale of the business to a new owner under an accounting-based earn-out agreement, a feature often seen in acquisitions of small private firms by equity investors. Value-maximizing decisions require goal congruence...

... for the manager. If the principal can observe the unfavorable demand events, then goal congruence can be achieved using very simple accrual accounting rules, such as straight-line depreciation. JEL Classifications: G31; M41; M52. We are grateful to Tim Baldenius, Jonathan C. Glover (editor), Stefan...