Post-Closing M&A Disputes: Strategies for Mitigating and Resolving Working Capital and Earn-Out Conflicts

Chad Barton | Holland & Knight LLP

Chad Barton is a corporate attorney in Holland & Knight’s Dallas office. Private equity sponsors, their portfolio companies and a variety of other public and private companies rely on Mr. Barton’s extensive experience to assist them with complex strategic, financial and other business transactions, such as mergers and acquisitions (M&A), including bolt-on and roll-up transactions; divestitures; carve-outs; joint ventures; restructurings; private equity-backed investments and venture capital investments, as well as general corporate counseling.

Mr. Barton has substantial experience with planning, structuring and negotiating transactions for a diverse range of public company and private equity clients in the healthcare, energy, technology and telecommunications sectors. He also drafts purchase agreements, services and supply agreements, contribution and distribution agreements and other commercial contracts, joint venture agreements, confidentiality and exclusivity agreements, licensing agreements, earn-out agreements, term sheets and governance documents, such as limited liability company agreements, partnership agreements and bylaws, and various consents, authorizations and resolutions.

In addition, Mr. Barton helps strategic acquirers realize their growth and financial goals (buy-side and sell-side) and advises clients in various debt and equity transactions. He advises senior management and C-suite professionals, investment committees and boards with transactional analysis and risk analysis in connection with crucial commercial decision-making. These activities include analyzing diligence and documentation requirements, supervising the teams who implement approved strategies, analyzing and synthesizing diligence findings and work product and translating the same into concise, visually informative summaries and ultimately into a comprehensive suite of transactional documents.

Max Mitchell | Grant Thornton Advisors LLC

Max is a Partner in Grant Thornton’s Transaction Advisory practice. Max leads Grant Thornton’s Purchase Agreement Advisory (PAA) practice, having established the service offering for Grant Thornton in February 2019. Max has over fifteen years of experience providing financial and accounting services to clients.

Max advises buyers and sellers on the accounting and financial aspects of purchase agreements. He gives guidance on the purchase price mechanisms (closing balance sheet, or ‘locked box’), price adjustments and the key value drivers (working capital, cash, indebtedness) that determine the final price paid and received on deals, as well as the accounting representations and warranties, earn-outs, escrows, dispute resolution clauses, and the financial definitions underpinning agreements.

His team is an integrated, specialist purchase agreement advisory group, with a focus on mid-market transactions. He brings insights and experience from over a thousand transactions, ranging from under $10m to over $2bn in enterprise value, to help navigate the accounting complexities and potential pitfalls within the purchase agreement, providing advice that protects dollar value, while mitigating the risk of disputes. Max has been qualified as an expert on working capital.

I. Market conditions driving earnout usage | 1:00pm – 1:30pm

• Why earnouts are surging in popularity amid valuation gaps and economic volatility

II. Common triggers of post-closing disputes | 1:30pm – 2:00pm

• How earnout metrics (e.g., revenue vs. EBITDA) influence dispute likelihood
• How working capital mechanisms can frustrate negotiations or cause post-closing contention

Break | 2:00pm – 2:10pm

III. Best practices for drafting and structuring earnouts and working capital mechanisms | 2:10pm – 2:40pm

• Techniques to reduce ambiguity and align incentives between buyers and sellers

IV. Mitigation strategies and legal safeguards | 2:40pm – 3:10pm

• Practical steps to minimize disputes, including audit rights and dispute resolution clauses