The buyer is offering an earnout based on customer retention, but they plan to merge our client success teams immediately after closing. How do we structure the post-close operating covenants to prevent their staff from driving away our legacy clients and killing our earnout?

Question

Tyler Smith · Accepted Answer

To protect your earnout, you must negotiate strict operational covenants that limit the buyer's ability to alter client-facing processes. Do not rely on their goodwill. You need to write clear, enforceable boundaries directly into the purchase agreement.

First, mandate that your legacy account management team remains the primary point of contact for all existing clients during the earnout period. Use your EOS Accountability Chart to define these roles clearly. The buyer cannot restructure or reassign these seats without your written consent. If they do, it must trigger an immediate acceleration of the earnout payment.

Second, define customer retention using a clean metric. Focus on Net Revenue Retention of the specific accounts you transition, rather than a general customer count. This keeps the calculation objective and prevents disputes over whether a client left because of your product or their poor integration.

Third, establish an integration committee with equal representation. Any changes to customer onboarding, pricing, or service level agreements must pass through this committee. If a dispute arises, the default resolution must favor your historic operating procedures.

By locking in these guardrails, you ensure that the operational standards that built your client loyalty remain intact. This protects your hard-earned equity and keeps the buyer from accidentally destroying the value they just purchased.