A post-M&A earn-out dispute.
- 01$210mEarn-out at stake
- 024Expert reports filed
- 035 daysEvidentiary hearing
- 04ICDRArbitral institution
Our team was appointed by the acquirer’s counsel after the sellers of a software business claimed a missed earn-out payment—a matter turning on revenue recognition, the operation of the purchase agreement and whether post-closing decisions had depressed performance.
The question
The sellers alleged that integration choices had deliberately suppressed recurring revenue below the earn-out threshold. The tribunal had to determine how revenue should be measured under the agreement and whether the target would have met its targets had it been run as the sellers contended.
Our approach
We rebuilt the earn-out calculation from the general ledger and customer contracts, applying the agreement’s accounting definitions line by line. A separate model tested the sellers’ counterfactual, isolating the effect of each integration decision from wider shifts in customer demand across the sector.
The evidence
Our analysis showed that the shortfall was driven mainly by customer churn that began before closing and was visible in the data room. The sellers’ counterfactual assumed renewal rates the business had never achieved, a point the tribunal pursued during cross-examination.
The outcome
The tribunal found that the earn-out threshold had not been met and that integration decisions had only a marginal effect on revenue. The sellers’ claim was dismissed in substantial part, with costs awarded to our client.
An earn-out dispute is usually decided in the definitions long before it reaches the numbers.