We are negotiating an earnout tied to our new automated onboarding system, but we are worried the buyer will starve our team of the resources needed to launch it. How do we secure binding resource commitments?

Question

Tyler Smith · Accepted Answer

An earnout is only as good as your ability to execute post-close. If a buyer cuts your budget, reassigns your developers, or delays key software purchases, they can easily cause you to miss your performance targets, saving themselves millions in purchase price.

To prevent this, you must write specific, legally binding resource commitments into your purchase agreement. Do not rely on vague promises of cooperation. You need hard numbers and clear operational covenants.

Specify the exact dollar amount of capital expenditure and operating budget that the buyer must allocate to your business unit during the earnout period. Detail the headcount requirements and protect your key team members from being reassigned to other parent company projects without your written consent.

Link these commitments directly to your operational roadmaps. If the buyer fails to provide the agreed-upon resources or funding, the purchase agreement must include an acceleration clause. This clause states that if a resource covenant is breached, the entire earnout is deemed fully achieved and becomes immediately payable. This structure ensures the buyer has skin in the game and protects your financial upside.