Good morning, CFOs. Earnouts are on the rise; Apple introduces its next CEO; and Senate Democrats plan to press Fed chair nominee over his financial disclosures.

More acquirers are turning to earnouts to entice private companies to sell.

Last year, 24% of acquisitions of private companies included an earnout provision, according to SRS Acquiom, which helps companies manage acquisitions and loan facilities. By comparison, 20% of such deals included an earnout in 2020, and 14% had them a decade earlier. The figures, which include about 3,800 transactions, exclude life sciences deals, where earnouts are common.

Earnouts make a portion of the deal’s value contingent on the acquired company meeting certain financial or performance targets. They were particularly popular two years ago, when buyers and sellers had a tough time finding ground on deal values. At the time, higher interest rates and inflation led buyers to lower their projected deal values, while rising stock valuations pushed sellers to demand higher offers. Thirty-three percent of private deals in 2023 contained an earnout provision, according to SRS Acquiom.

A mix of factors has driven companies’ reliance on earnouts over the past decade. Sellers are staying private for longer and demanding higher deal values to compensate their investors, according to SRS Acquiom. In addition, earnouts are appearing more often in private-equity deals, and have been included in early-stage technology transactions, according to Kip Wallen, a senior director at SRS Acquiom.

• Key quote: “Using an earnout is one way you can sweeten your deal,” Wallen said.

But earnouts don’t always work out as sellers intend. In an analysis of 100 deals since 2021 with complete earnouts and no pending disputes, SRS Acquiom found that sellers received 21% of their potential earnout values. The median length of a performance target on an earnout provision is around two years—enough time for a seller to encounter challenges, such as having a star sales person leave. “A lot can happen in two years,” Wallen said.

📆 Earnings

• 3M
• Capital One
• Halliburton
• Northern Trust
• Tractor Supply
• United Airlines Holdings

📈 Economic Indicators

• The Census Bureau reports retail and food services sales for March.
• The National Association of Realtors reports its Pending Home Sales Index for March.
• Kevin Warsh, President Donald Trump’s Federal Reserve chair nominee, is set to appear before the Senate Banking Committee.

Tim Cook, the longtime leader of Apple, is stepping down after transforming the iPhone maker into a titan of the technology industry, handing the reins to a veteran engineer. The company said John Ternus will take over as CEO, elevating an affable mechanical engineer and 25-year veteran of the company’s hardware division.

A central question for Ternus is how he can help Apple maintain its dominance at a time when most of its rivals are investing hundreds of billions of dollars into computing infrastructure and embedding cutting-edge AI tools into their products and daily workflows.

Ternus will also need to spark Apple’s innovative fire, which some critics feel has been lost under Cook.

• Senate Democrats plan to press Fed chair nominee Kevin Warsh over perceived gaps in his financial disclosures.
   
• Labor Secretary Lori Chavez-DeRemer resigned amid a tumultuous tenure.
   
• Amazon said Monday that it would invest an additional $5 billion in Anthropic.
   
• Spirit Airlines is looking for a lifeline from the Trump administration.
   
• Inside the nasty fight between two of the world’s most storied gun makers, Beretta Holding and Sturm Ruger.

The WSJ CFO Council convenes the world’s top financial leaders so they can gain perspective on navigating market uncertainty, aligning priorities and making decisions that deliver measurable results. Join this trusted community where CFOs exchange approaches, access strategic insights and continuously sharpen their influence across the enterprise.

Request Information.

Snap, the Santa Monica, Calif.-based social media company, named Doug Hott as CFO, succeeding Derek Andersen, who is leaving for another opportunity. Andersen’s last day is May 8. Hott is currently vice president of finance, strategy and corporate development.

—Elias Schisgall contributed to today’s Ledger.

The Wall Street Journal's CFO Journal offers corporate leaders and professionals CFO analysis, advice and commentary to make informed decisions. We cover topics including corporate tax, accounting, regulation, capital markets, management and strategy.

Follow us on X @WSJCFO. The WSJ CFO Journal Team comprises reporters Kristin Broughton, Mark Maurer and Jennifer Williams, and Bureau Chief Walden Siew.

You can reach us by replying to any newsletter, or email Walden at walden.siew@wsj.com.