Contingent Value Rights (CVRs): What Aussie Investors Need to Know in 2025

When a big merger or acquisition hits the headlines, most eyes turn to the upfront cash or shares on offer. But in 2025, a growing number of Australian deals are coming with an extra twist: Contingent Value Rights (CVRs). These financial instruments are quietly reshaping the way companies negotiate, de-risk, and sweeten their deals. If you’re an investor, a founder, or just keen on the mechanics of modern dealmaking, understanding CVRs is becoming essential.

What Are Contingent Value Rights (CVRs)?

At their core, CVRs are promises. They’re written commitments from a buyer to pay additional value to the sellers or shareholders of a company—if certain future events or milestones occur. CVRs are most often used in mergers and acquisitions (M&A), particularly when there’s uncertainty about the value of a company’s assets, upcoming projects, or regulatory decisions.

• Example: A biotech startup is being acquired by a pharma giant. The buyer agrees to pay an extra $2 per share to existing shareholders if the startup’s cancer drug gets TGA approval within three years.

• CVRs can be tied to revenue targets, regulatory approvals, asset sales, or even share price performance.

• They usually have a defined expiry (often 1–5 years) and become worthless if the milestone isn’t met.

CVRs can be structured as tradeable securities (letting shareholders sell them on the market), or as non-tradeable rights that only original holders can claim.

Why CVRs Are Back in the Spotlight in 2025

The Australian M&A scene in 2025 is buzzing with activity, but also rife with uncertainty. Volatile markets, rapid changes in technology, and evolving regulatory landscapes mean buyers and sellers often disagree on what a business is truly worth. CVRs offer a creative solution to these valuation gaps.

• Risk Sharing: CVRs shift some of the risk of future outcomes from the buyer to the seller or shareholders, making deals more likely to close.

• Regulatory Influence: With the Australian Competition & Consumer Commission (ACCC) stepping up scrutiny on major deals and the TGA’s evolving framework for biotech approvals in 2025, CVRs help buyers hedge against regulatory delays or denials.

• Sector Focus: CVRs are particularly popular in life sciences, tech, and resources—industries where future value is highly dependent on unpredictable outcomes.

In March 2025, the acquisition of Sydney-based medtech firm Immunova included a CVR that could deliver up to $150 million in additional payments if its lead diagnostic tool achieves commercial sales targets by 2027—a structure that kept both bidders and shareholders engaged despite market jitters.

What Investors and Founders Should Watch For

CVRs can be a win-win, but they also come with complexity and risk:

• Valuation Challenges: Assigning a fair value to a CVR is tricky, as it depends on the probability of the milestone being achieved and the payment structure.

• Disclosure and Transparency: In 2025, ASX-listed companies issuing CVRs must provide clear disclosures in their scheme booklets and annual reports, following new ASIC guidance aimed at protecting retail investors from misleading promises.

• Tax and Accounting: For Australian shareholders, CVR payments are generally treated as capital gains, but the exact timing and tax implications can be complex—especially if the CVR is tradeable.

• Liquidity: Most CVRs in Australian deals are non-tradeable, meaning holders need to wait for the milestone event. However, some high-profile deals (such as the 2025 merger of two lithium explorers in WA) have issued tradeable CVRs, giving investors the option to cash out early—albeit often at a discount.

Founders and boards negotiating M&A deals should weigh the benefits of a CVR against potential post-deal disputes, the cost of ongoing administration, and the risk of creating perverse incentives (such as buyers underinvesting in milestone achievement).

The Bottom Line: CVRs as Strategic Tools for 2025 and Beyond

Contingent Value Rights are no longer niche instruments—they’re a strategic lever for Australian dealmakers navigating a world of uncertainty. Whether you’re considering a takeover bid, a strategic merger, or an exit from a high-stakes startup, understanding CVRs can help you unlock value, manage risk, and strike deals that work for all sides.

As more ASX deals feature CVRs and regulators sharpen their focus on disclosure, expect to see these clever contracts continue to shape the Australian financial landscape in 2025 and beyond.