Leadership1 publisher3 min readPublished
Biopharma buyers put a contingent payout in more than half of 2025's public deals
Sidley Austin counts 28 contingent value rights across 59 announced public life sciences deals last year, a record share, with the contingent piece averaging 39% of the upfront price. The first half of 2026 ran near half that rate.
The Board Room · Leadership desk
What happened
- Sidley Austin's survey of public life sciences M&A found 28 of 59 deals announced in 2025 carried a contingent value right, about 47%, the highest annual count and share the firm has recorded.
- Maximum potential payouts averaged 39% of upfront consideration in 2025 with a median of 27%, above the 34% average and 24% median for deals since 2021, outliers excluded.
- In the first half of 2026, about 24% of announced life sciences deals included a CVR, and Sidley says the full-year trend is yet to be determined.
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Why it matters
- constraint Every recent life sciences CVR is event-driven, so once the upfront number is set a target board's remaining leverage sits in how the triggering event is defined and measured.
- exposure One year now holds most of the deals where the contingent entitlement can exceed the whole upfront price, concentrating post-closing valuation risk on the shareholders who sold in that cohort.
- contradiction Deals above $3 billion kept using CVRs after the survey closed, so the softer half-year figure does not settle whether the structure is retreating or still moving upmarket.
- precedent With repeat strategic buyers using CVRs across multiple deals, a seller refusing one is now arguing against that acquirer's own house practice.
The large-deal numbers in Sidley Austin's survey are counts inside the CVR dataset, not rates. Nine of the 19 life sciences CVR deals above $3 billion since 2008 were announced from January 2025 onward [8], and the memorandum does not report how many $1 billion-plus life sciences deals were announced over the same stretch [18]. So the share of large deals that used a CVR is unknown. What the counts do support is a change in frequency: 22 of the 35 billion-dollar CVR deals were announced across 2008 through 2024 [1], about 1.3 a year [2], against 13 in the six quarters to June 30, 2026, about 8.7 a year [3]. Most life sciences CVR deals are still under $1 billion [14].
The trade-off handed to a target board is specific. It takes less cash at close and keeps exposure to whether a regulatory or commercial event lands, and the Sidley partners Sally Wagner Partin and Sharon R. Flanagan describe CVRs as bridging valuation gaps and allocating regulatory and commercial risk [16][1]. In 2025 the median contingent slice ran three percentage points wider than the median for deals since 2021 [7]. Every life sciences CVR announced since 2021 was event-driven [12], and 2025 alone produced about 64% of all surveyed deals whose maximum payout exceeded the upfront price [11].
Sequencing matters as much as the share. A CVR signed this quarter becomes a measurement and dispute obligation for years, because someone has to determine whether the defined event occurred [12]. Sidley notes repeat strategic buyers among CVR users [15]. A buyer on its second or third CVR negotiates from its own prior agreement, and I would expect that drafting experience, more than the payout percentage, to be where target boards give ground.
A skeptic reading the same tables would say the peak is behind us: about 24% of announced life sciences deals in the first half of 2026 included a CVR, roughly half the 2025 share [4], and Sidley says the full-year trend is yet to be determined [6]. Two further CVR deals above $3 billion were announced after the survey's June 30, 2026 cutoff [9]. The defensible conclusion for a board sitting down this quarter is narrower than a default. In biopharma, where about 38% of announced public deals since 2021 carried a CVR against about 30% across life sciences [4], expect the buyer to raise one. In the record year itself, 31 of the 59 announced life sciences deals were done without [6].
This is a sector instrument. Of 1,199 public deals announced across all industries since 2021, 77 included a CVR, about 6%, and roughly 92% of those were in life sciences [5], about 71 deals [5]. The newest movement is in medical devices, where four of the seven CVR deals of the past decade were announced in 2025 [13].
What to watch
- Whether Sidley's next installment shows the second half of 2026 recovering the 2025 share or confirming the softer half-year rate.
- Whether deals with maximum payouts above 100% of upfront consideration recur in 2026 or stay a 2025 cluster.
- Whether repeat strategic buyers begin reusing standard trigger and measurement language across successive CVR deals.