Earn-Out & M&A Dispute Contract Loss Expert Witness

Earn-out provisions in share purchase and asset sale agreements tie part of the consideration to post-completion performance, aligning the interests of buyer and seller over an agreed measurement period. Disputes arise when sellers allege that the buyer's conduct, such as diverting resources, changing commercial strategy, integrating the business in a way that suppresses performance, or failing to invest as contemplated, prevented earn-out targets from being achieved. Expert witnesses construct a but-for model showing what the target business would have achieved absent the alleged breach, applying the earn-out formula to quantify the resulting payment shortfall.

Completion accounts disputes present a distinct but related category of M&A quantum work. Where the purchase price is adjusted by reference to the target's financial position at completion, disagreements frequently arise over accounting policies, normalisation adjustments, working capital definitions, and debt items. Expert accountants analyse the completion accounts, the sale and purchase agreement's accounting mechanics, and industry practice to identify departures from the agreed methodology and quantify the price adjustment required. Warranty and indemnity claims for undisclosed liabilities may run in parallel, requiring separate loss quantification.

M&A disputes demand experts who understand transaction structures, locked-box versus completion accounts mechanisms, and the interaction between contractual warranties and general damages claims. Financial due diligence records, management accounts, and post-completion trading data form the evidential foundation. Expert reports address causation between the alleged conduct and the financial outcome, apply appropriate discount rates to deferred consideration, and consider the seller's duty to mitigate by taking reasonable steps to maximise earn-out performance where the agreement imposes such obligations.

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