Earnouts after closing
Earnouts tie part of the price to future performance, which means the seller's payment depends on how the buyer runs the business. Disputes typically concern how revenue or earnings are calculated, whether the buyer made decisions that undermined the targets, and what level of effort the agreement required. The answer depends heavily on the language: some agreements include detailed operating covenants, while others leave the buyer broad discretion. Courts generally enforce the agreement as written, so vague efforts clauses are fertile ground for disputes. Sellers who remain employees face additional complexity, since their employment terms may interact with the earnout.
Indemnity claims and their procedure
Indemnification claims usually must follow detailed procedures: written notice with specified content, delivery to particular addresses, and assertion within survival periods set by the agreement. Third-party claims, such as a customer lawsuit or a tax assessment from a pre-closing period, often trigger provisions on who controls the defense and whether settlements need consent. Gather the purchase agreement, disclosure schedules, closing statements, financial records, and correspondence on the issue. A notice that misses required content or timing can weaken an otherwise valid claim. If the buyer has representations and warranties insurance, the policy's own notice and cooperation terms should be followed alongside the agreement's.
Covenants and the next step
Sellers often agree to non-competition, non-solicitation, and confidentiality covenants, and courts tend to review covenants made in a business sale more favorably than ordinary employee restrictions. Breaches can lead to claims for injunctions and damages. In a first review we identify which mechanisms apply to each issue, check whether notices have been given properly, and assess whether escrow, setoff, or negotiation offers a practical resolution. We also consider the relationship, since many post M&A disputes are resolved when both sides recognize the cost of continued conflict.
