1. How Regulatory Reviews Can Affect Cross-Border M&A Closings
International acquisitions may require federal regulatory filings before the parties can close. Under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act, parties must determine whether a transaction meets the applicable notification thresholds and whether an exemption applies. For 2026, the baseline size-of-transaction threshold is $133.9 million, with additional requirements depending on the transaction.
Foreign investment can raise a separate set of questions. The Committee on Foreign Investment in the United States (CFIUS) reviews certain transactions involving foreign investment in U.S. .usinesses for potential national security concerns. Depending on the transaction, a filing may be voluntary or subject to a mandatory declaration requirement.
Hsr and Cfius Timing
Federal antitrust review and foreign-investment review operate differently. Following an HSR filing, parties generally must observe the applicable statutory waiting period before closing. A Second Request can extend that timeline substantially when regulators require additional information about potential competitive effects. Companies dealing with these requirements may need to coordinate the transaction timetable with applicable Hart-Scott-Rodino Filing requirements.
CFIUS review focuses instead on national security concerns associated with covered transactions. Certain investments involving TID U.S. .usinesses—businesses associated with critical technology, critical infrastructure, or sensitive personal data—can receive particular scrutiny. A CFIUS notice generally enters a review period of up to 45 days, and a further investigation may follow when concerns remain unresolved. Transactions presenting these issues may therefore require separate CFIUS Compliance analysis.
Regulatory timing can affect the commercial terms of the acquisition in several ways:
- Extended regulatory review can push back the expected closing date.
- Purchase-price payments may need to accommodate extensions of contractual long-stop dates.
- Earn-out measurement periods may need adjustment when integration cannot begin as expected.
- Escrow funding and release conditions may depend on the closing mechanics agreed by the parties.
Deal documents should therefore state what happens if regulatory approval takes longer than anticipated. The parties may need to address whether an earn-out period begins at closing, whether a delayed closing changes milestone dates, and how regulatory conditions interact with purchase-price payments.
2. How Earn-Out Agreements Allocate Valuation Risk
Earn-out provisions can bridge a valuation gap when buyers and sellers have different expectations about the target company's future performance. Rather than paying the entire negotiated value at closing, the buyer pays part of the consideration later if specified financial or operational milestones are achieved.
In cross-border transactions, those milestones can be harder to measure than they appear. Accounting practices, currency movements, corporate restructuring, and the allocation of parent-company expenses can all change the results used to calculate an earn-out.
Choosing the Performance Metrics
Clear performance metrics are central to an earn-out provision. The parties may use revenue, profitability, customer retention, regulatory milestones, or another measurable business target. The agreement should also identify the accounting principles and calculation methods that apply.
| Valuation & Risk Consideration | Buyer Perspective | Seller Perspective |
|---|---|---|
| Primary Financial Metric | Net income may better reflect profitability | Gross revenue may reduce the effect of buyer-controlled expenses |
| Accounting Framework | Consistency with buyer accounting policies | Consistency with the target's historical practices |
| Operational Control | Flexibility to integrate the acquired business | Covenants limiting actions that could distort earn-out results |
| Cross-Border FX Impact | Conversion into the parent's operating currency | Fixed or agreed exchange-rate methodology |
Foreign currency is particularly important when the acquired company earns revenue in one currency while the purchase agreement measures performance in another. Parties can specify an agreed conversion methodology, reference rate, or measurement currency rather than leaving the issue unresolved until the earn-out becomes payable.
Preventing Post-Closing Earn-Out Disputes
Operational control can also become contentious. A buyer may want freedom to integrate the acquired business, while the seller may be concerned that restructuring, expense allocations, or changes in business strategy will reduce the earn-out.
The agreement can address these concerns through operating covenants, information rights, access to financial records, and a defined calculation process. If the parties disagree over the numbers, they may designate an independent accountant or another agreed decision-maker to resolve specified accounting disputes.
These provisions are especially important in Mergers & Acquisitions involving businesses operating across several jurisdictions, where financial reporting and operational decisions may affect the same earn-out calculation in different ways.
3. How Escrow and Indemnification Address Post-Closing Risk
Escrow serves a different purpose from an earn-out. Rather than making additional consideration dependent on future performance, an escrow arrangement generally places an agreed portion of transaction consideration with an escrow agent to secure specified post-closing obligations.
The purchase agreement and related Escrow Agreements should identify the claims that can be made against those funds, the procedures for giving notice, and the conditions governing release.
General and Special Escrow Arrangements
General escrow funds may secure claims involving breaches of representations and warranties or certain purchase-price adjustments. Separate holdbacks can also be negotiated for known risks such as a pending tax matter, regulatory inquiry, trade-compliance issue, or another identified liability.
Survival periods should not be treated as fixed rules. The parties negotiate them based on the representations involved, the governing law, the nature of the identified risks, and the overall allocation of liability in the acquisition agreement.
Claim procedures matter as well. The documents should establish how a claim is submitted, what information must accompany it, how disputed claims affect scheduled releases, and when remaining funds return to the seller.
4. Coordinating Earn-Out, Escrow, and Closing Terms
Earn-out and escrow provisions can create problems when they are negotiated independently from the rest of the purchase agreement. A post-closing indemnification claim, for example, may raise the question of whether the buyer can recover exclusively from escrow or also offset the amount against a future earn-out payment.
The answer depends on the contract. If set-off is permitted, the agreement should define its scope and establish procedures for disputed claims. Without clear language, the parties may end up contesting whether two separate payment mechanisms were intended to interact.
Governing Law and Cross-Border Enforcement
Cross-border transactions also require deliberate choices about governing law and dispute resolution. The parties should identify which law governs the purchase agreement, where disputes may be heard, and how judgments or awards will be enforced when assets or counterparties are located outside the United States.
International arbitration may be appropriate for some transactions, while court litigation may make more sense for others. The choice depends on the jurisdictions involved, the nature of potential disputes, available enforcement mechanisms, and the broader transaction structure.
Payment currency, earn-out calculations, escrow release dates, purchase-price adjustments, and regulatory closing conditions should ultimately fit within the same contractual framework. Treating them as connected deal terms reduces the risk that one provision produces an unexpected consequence elsewhere in the transaction.
21 Aug, 2026
