The buyer is proposing a significant earnout based on post-acquisition EBITDA targets, but we are worried they will alter our internal team structure and make it impossible to hit those goals. How do we structure the operational governance and Accountability Chart protections in our purchase agreement to secure our earnout?

Question

Tyler Smith · Accepted Answer

Protecting your earnout requires you to maintain operational control over the key drivers of your business performance post-close. If a buyer can unilaterally restructure your team, starve your departments of resources, or alter your operating systems, they can easily trigger a failure to meet your earnout targets. You must write specific operational covenants into your purchase agreement.

First, negotiate terms that protect your EOS leadership structure. The purchase agreement should state that your leadership team will continue to run the business using the established Accountability Chart, and that key seats cannot be eliminated or consolidated without your consent. Your team must retain the authority to hire, fire, and allocate resources to hit the earnout targets.

Second, insist on retaining your weekly Level 10 Meeting and quarterly EOS cadence. This operational structure ensures your team can continue to identify, discuss, and solve issues that could threaten your performance targets. Use the Step by Step Exit model to show the buyer that your operational discipline is the exact reason you hit your numbers. By legally protecting your operating system and your team's autonomy during the earnout period, you ensure that you retain the tools and authority necessary to execute your plan and secure your full financial payout.