Protect M&A earnouts linked to acquired contracts. Understand how termination rights create hidden risks for seller payments and find pre-closing strategies for lower middle market deals. M&A Stories May 29, 2025 In lower middle market mergers and acquisitions, earnouts are…
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M&A Earnouts on Acquired Contracts: Guarding Against Hidden Termination Risks
Posted in earnout based upon revenue from at will contracts, problems with earnouts Tagged with: acquired contracts, asset purchase agreement, at-will contracts, Buyer Obligations, contract termination, contractual provisions, cybersecurity staffing, earnout protection, implied covenant of good faith, lower middle market M&A, M&A earnout, M&A litigation, pre-closing due diligence, private company sale, seller protections, transaction risk
Operational Clarity: Protecting Earnouts Beyond Financial Targets in Lower Middle Market M&A
Beyond Financial Targets: How Operational Clarity Protects Earnouts in Lower Middle Market M&A. Learn from a recent case highlighting the crucial need to address post-closing operational control in deal agreements to minimize litigation risks for buyers, sellers, and advisors. M&A…
Why Delaware’s Implied Covenant of Good Faith and Fair Dealing Is Not Enough Protection for an Earnout
In this blog post, we explore the crucial role of earnout agreements in M&A transactions and why Delaware’s implied covenant of good faith and fair dealing is not sufficient protection for sellers. A recent Delaware Court of Chancery case underscores…
Posted in Express efforts clause vs. Delaware's implied covenant of good faith and fair dealing, problems with earnouts Tagged with: Breach of contract, commercial reasonable efforts, Contractual obligations, Delaware court decision, Delaware Court of Chancery, Earnout agreements, earnout milestones, express efforts provision, good faith efforts, implied covenant of good faith and fair dealing, M&A lawyers, M&A legal considerations, M&A legal disputes, M&A negotiation, M&A seller protections, M&A transaction risks, private company deals, Private Equity, seller vulnerability, seller's rights
Earnouts and the Importance of Key Employee Retention
M&A earnouts pose significant risks for sellers, especially when buyers control post-closing business performance. This blog examines a case where a seller lost a $5 million earnout after a private equity buyer moved key employees to a separate management company.…
Posted in Key Employee Retention Requirement, problems with earnouts Tagged with: Acquisition Agreements, acquisition structuring, Breach of contract, Business acquisitions, Contract Obligations, Delaware Superior Court, earnout litigation, EBITDA targets, financial performance in M&A, key employee retention, Legal Risks in M&A, M&A Dispute Resolution, M&A earnouts, management company strategy, Post-closing disputes, post-closing employment issues, private equity acquisitions, private equity roll-ups, purchase agreement enforcement, seller protections
When Private Equity’s Global Strategy Undermines Earnouts
This blog delves into the legal complexities of earnouts in private equity acquisitions, using a recent Delaware Superior Court case as a key example. It explores the risks sellers face when private equity firms orchestrate strategic decisions that negatively affect…
Posted in private equity, problems with earnouts Tagged with: Acquisition Agreements, affiliate immunity, breach of earnout, Business acquisition, buyer group, corporate group law, Delaware law, Delaware Superior Court, Earnout disputes, Earnout Provisions, earnouts, EBITDA performance, M&A acquisitions, M&A Legal Risks, PE firm accountability, PE firm liability, portfolio company, Private Equity, private equity sponsor, Punitive damages, seller protections, strategic decisions, tort claims, tortious interference
The Risks of Earnouts with Buyers Who Compete
Earnouts are risky, especially when your buyer has a pre-existing competitive business. M&A Stories December 6, 2024 In 2019, a seller of athletic event registration software agreed to sell its assets to a buyer in the same industry. The transaction…
Posted in problems with earnouts Tagged with: asset purchase agreement disputes, athletic event software industry, business acquisition legal risks, buyer conflict of interest, commercial reasonableness in M&A, competing businesses in acquisitions, Delaware court decisions, Earnout agreements, M&A legal disputes, post-closing obligations, protecting seller earnouts, revenue diversion, seller risks in M&A, small business M&A challenges
Buyer-Friendly Earnout Provision Shields Buyer from Seller’s Claim
This blog dives into a key M&A case from the Delaware Court of Chancery that underscores the importance of earnout clauses in asset acquisition deals. It centers on a $1.7 million acquisition in the data management sector, where the buyer…
Posted in problems with earnouts Tagged with: acquisition terms in M&A, asset acquisition case, buyer discretion in M&A, buyer-friendly earnout provision, buyer’s interests in acquisitions, Delaware Court of Chancery, earnout clause interpretation, earnout clause protection, M&A case study, M&A legal disputes, M&A legal strategies, Post-closing disputes, protective M&A terms, revenue-based earnouts, Seller Claims, Walmart contract data management
Earnouts: The Importance of Clear Buyer Obligations
This blog explores the complexities of earnout structures in M&A deals, emphasizing the need for sellers to negotiate clear post-closing obligations. Using a real-life Delaware court case, the post highlights how vague earnout terms can lead to disputes and legal…
Posted in problems with earnouts Tagged with: acquisition contract disputes, Breach of contract in M&A, buyer obligations in acquisitions, commercial reasonable efforts in earnouts, Delaware court M&A rulings, earnout litigation, earnouts in acquisitions, implied covenant of good faith, M&A Disputes, M&A Legal Cases, post-closing obligations, purchase agreement obligations
Delaware Court Awards Over $1 Billion in Earnout Dispute Over Surgical Robot Milestones
This blog covers a Delaware Court of Chancery case involving a $1 billion earnout dispute over FDA milestones in the acquisition of a surgical robotics startup. The post highlights key legal issues such as earnout provisions, commercially reasonable efforts obligations,…
Posted in problems with earnouts Tagged with: and corporate fraud in M&A, Commercially reasonable efforts, competing products, Delaware Court of Chancery, earnout dispute, FDA approval, implied covenant of good faith, M&A litigation, Medical device acquisition, merger agreement, post-closing litigation, regulatory milestones, surgical robots, venture-backed startups
M&A Buyer’s Earnout Risk
Explore the complexities of M&A transactions with a deep dive into the legal battles surrounding earnouts. This post dissects a real-world case involving a $226 million acquisition in the insurance industry, where the buyer alleges overpayment due to fraudulent earnout…
Posted in problems with earnouts Tagged with: acquisition agreement compliance, acquisition financial targets, Breach of contract in M&A, buyer earnout risk, Earnout disputes, earnout structuring, federal district court M&A cases, financial misrepresentation, fraud in mergers and acquisitions, good faith in business deals, insurance brokerage M&A, legal implications of earnouts, legal strategies in M&A, M&A case studies, M&A deal risk management, M&A industry insights, M&A legal issues, M&A litigation, PCF Insurance Services case, Post-closing disputes, private equity acquisition
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