Earn-Out Dispute Analysis
Construct but-for earn-out models and assess whether buyer conduct or accounting changes affected earn-out achievement.
Earn-out disputes arise when performance targets are not met or earn-out calculations are contested. Disputes commonly involve whether underperformance was genuine or caused by buyer conduct, and whether the agreed accounting basis was correctly applied.
The but-for analysis is the core forensic tool. The expert constructs a model showing what earn-out metrics would have been absent alleged misconduct or accounting errors, and compares it to the actual outcome.
SPA earn-out provisions typically require consistent accounting policies during the earn-out period. Where the buyer changes policies to reduce reported metrics, the expert must restate on a consistent basis.
Methodology
- Review earn-out clause and accounting basis
- Model but-for performance scenarios
- Assess policy continuity during earn-out period
- Quantify impact of alleged buyer conduct
Frequently Asked Questions
How does an expert establish buyer conduct prevented the earn-out?
Can earn-out accounting disputes go to expert determination?
What earn-out metrics are most commonly disputed?
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