We are finalizing our purchase agreement, but we are terrified of getting dragged into a legal battle over our earnout calculations post-close. How do we write an operational dispute resolution process into the agreement to protect our team?

Question

Tyler Smith · Accepted Answer

Earnout disputes are incredibly common because buyers have a natural incentive to minimize their post-closing payouts by manipulating their accounting. If your purchase agreement only relies on standard litigation as a remedy, you will spend years in court burning up your profits on legal fees. You need a fast, operational dispute resolution mechanism built directly into the contract.

In corporate purchase agreements, specify that any disagreement over earnout calculations must first be addressed in an informal, structured meeting of the principals, modeled after an EOS Level 10 Meeting. Give both parties thirty days to run the dispute through an IDS (Identify, Discuss, Solve) session to see if an operational compromise can be reached without outside interference.

If the issue remains unresolved, the contract should require the immediate appointment of an independent, pre-selected accounting firm to act as an arbitrator. This firm must specialize in post-closing transactional disputes and their decision must be binding on both parties, with the losing party paying the fees. By establishing a clear, multi-step resolution process that moves from internal operational alignment to fast-track independent accounting arbitration, you prevent the buyer from using legal delays to starve you out of your hard-earned payout.