The buyer is structuring part of our earnout around hitting customer satisfaction scores, but they plan to migrate our customer service to their offshore team post-close. How do we structure the operational metrics to prevent their integration decisions from killing our payout?

Question

Tyler Smith · Accepted Answer

When a buyer ties your earnout to operational performance metrics like customer satisfaction or customer retention, but insists on changing the underlying delivery model, you are setting yourself up for failure. You cannot accept financial or operational targets if you lose the direct authority to manage the inputs. If the buyer insists on migrating your customer service team to an offshore model, you must negotiate an operational veto or a clear covenant in the purchase agreement. This covenant must state that if any post-closing integration action by the buyer negatively impacts the performance metric, the earnout targets are deemed fully met for that period. Alternatively, shift the metric away from customer satisfaction entirely and base the earnout on gross profit or top-line revenue generated by those accounts, with a stipulation that the historic service standards must be maintained by the buyer. In your EOS framework, your Accountability Chart defines who has the authority to deliver results. If the buyer is taking the seat on the Accountability Chart that owns customer service, they must own the risk of that seat's performance. Never let a buyer manage the seat while you take the financial hit on the scorecard. Specify in the definitive agreement that any material change in operating procedures, staff location, or software platforms used to service these clients triggers an automatic adjustment of the earnout hurdle. This keeps the buyer's integration team honest and ensures they do not sacrifice your hard-earned payout to chase their own short-term cost synergies.