We are negotiating an earnout that spans eighteen months post-close, but we are worried the buyer will make operational changes that disrupt our team and cost us our payout. How do we write strong operating covenants into the purchase agreement to protect our day-to-day autonomy?

Question

Tyler Smith · Accepted Answer

An earnout is only as good as your ability to execute your business plan post-closing. If the buyer steps in and reassigns your key developers, cuts your marketing budget, or forces your team to abandon your EOS tools, your earnout targets will quickly slip out of reach. To prevent this operational disruption, you must secure robust operating covenants in the purchase agreement. These covenants are legally binding promises that restrict the buyer's ability to meddle in your day-to-day operations during the earnout period. Specifically, require that the buyer maintains your existing budget levels, preserves your current Accountability Chart, and keeps your core leadership team in their defined roles. Insert a clause that prohibits the buyer from transferring your staff to other business units without your written consent. Furthermore, mandate that your division retains full control over its operational decisions, including the continued use of your AI-driven automated workflows and weekly Level 10 Meeting structures to solve issues. If the buyer violates any of these operating covenants, the purchase agreement should state that the earnout is immediately deemed fully achieved and payable. This aligns the buyer's incentives with your operational autonomy, protecting your team and securing your financial upside.