This post details how sellers can safeguard their $9 million EBITDA earnouts by drafting specific exclusions for corporate overhead and ensuring labor for major projects is not improperly deducted. M&A Stories December 23, 2025 Earnouts are often a source of…
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Protecting Your EBITDA Earnout From Corporate Overhead Allocations and Expenses that Should Be Capitalized
Posted in corporate overhead allocations, EBITDA earnouts, expenses that should be capitalized, problems with earnouts Tagged with: capitalized expenses in M&A, Chambers v. Genesee & Wyoming Inc., corporate overhead allocations, earnout calculation drafting, EBITDA deduction limits, EBITDA earnout protection, excluding overhead charges, labor expenditure disputes, lower middle market M&A disputes, M&A financial engineering, normal course of business expenses, post-closing earnout litigation, private business sale strategy, protecting seller earnouts, purchase agreement covenants, target company financials
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- earnouts in bankruptcy
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- problems with products liability claims
- Problems with Real Estate Leases
- problems with receivables
- problems with regulatory industry acquisitions
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- problems with seller nondisclosure
- problems with seller's employees
- problems with seller's lender
- Problems with seller's pre-closing errors & omissions
- Problems with seller's projections
- problems with seller's real property
- problems with seller's unemployment insurance experience rating
- problems with sharing tax benefits
- problems with simultaneous closings
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- problems with survival provisions
- problems with taxes
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- Problems with Undisclosed Liabilities
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- product line exception
- projections
- projections
- promissory estoppel
- promissory note
- prudence
- public information exclusion
- punitive damages
- purchase agreement
- purchase price
- purchase price adjustment
- purchase price reduction
- Put buy infrastructure promises in writing
- quality of earnings assessment
- ratifying unassumed contract by post-closing action
- reasonably equivalent value
- receipt of buyer equity – seller protections
- receipt of buyer equity or security
- receipt of buyer equity or security
- receivables
- reciprocal Non-Disparagement Clause
- recoupment doctrine
- reformation
- reformation of contract
- regulated business
- reliance
- remote use of trademark out of territory
- representation and warranty about customers
- representations and warranties
- rescission
- rescission
- restricted offset or setoff
- restrictive post-closing covenants
- retained business carveout
- retaliation
- retention bonus
- revenue and profit projections
- reverse termination or breakup fee
- Revlon doctrine
- Right of publicity
- risk of post closing payments
- robust buyer litigation warranty in earnout deal
- robust objective buyer earnout covenants
- royalty
- S corporation
- sale leaseback
- sale of assets of business
- sale of business to ESOP
- sale of product line
- sales order
- sales tax
- sales tax imposed on equity sale of DRE
- sales tax risk
- SBA approval re PPP loan
- scienter
- scope
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- Section 363 sale
- securing buyer's note
- securing deferred purchase price
- security agreement
- seller carried purchase price
- seller knowledge
- seller owner responsibility for underreported sales tax
- seller owners equity interest in buyer
- seller ownership in buyer
- seller rep of no federal employer liability
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- seller's covenants
- seller's federal injunctions
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- seller's warranty claims
- seller's workers compensation experience rating
- Selling shareholders problem with their board of directors
- severance benefits
- sexual harassment
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- shareholder buyout of partner
- shareholder personal guaranty of target lease
- shareholder release
- sharing transaction tax deduction benefits
- sick time
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- special indemnity escrow
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- spousal consent
- state and local tax
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- state franchise/income tax
- statute of frauds
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- step-down provision
- stock purchase agreement
- stock sale
- strategic acquisition
- strategic acquisition
- structure of transaction
- subordination
- substance over form
- substantially all assets
- success fee
- successor liability
- sufficiency of assets rep
- supply problems
- survival of covenants
- survival of reps and warranties
- survival period commencement
- tangible net worth
- target's stock options
- tax
- tax benefit sharing
- tax deferred reorganization
- tax penalties and additions
- Taxation
- termination of M&A agreement
- termination or breakup fee
- third party
- third party beneficiary clause
- time of the essence
- timely objection to indemnification claim
- tolling
- tolling
- tort misrepresentation in M&A
- tortious interference with prospective economic advantage
- trade secret misappropriation
- trade secret misappropriation by former seller employee
- trademark infringement
- trademarks
- transferee liability for taxes IRC Section 6901
- TRO/preliminary injunction before filing for arbitration
- tying fraud to economic loss
- typo or scriverner's error
- UCC search
- Uncategorized
- Uniform Fraudulent Transfer Act or Uniform Voidable Transfer Act
- union fringe benefits
- union liabilities
- unitary business
- unjust enrichment
- unliquidated or disputed claim
- unwanted assets
- vacation time
- valuation
- waiver of contractual provision
- waiver of jury trial
- waiver of removal to federal court
- waiver provision
- willful breach carveout
- willing buyer or procuring cause
- Withholding Post-closing payments
- working capital adjustment
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