Closing isn't always the end of the story. Some of the most stressful disagreements in a business deal actually arise after the deal has formally been completed.

Short answer: Disputes after closing typically arise when the buyer believes a warranty has been breached, when there's disagreement over an earn-out payment, or when the final adjustment of net debt and working capital (under completion accounts) gives a different result than the parties expected.

The most common types of disputes

  • Breach of warranty — the buyer believes a matter described in the transfer agreement turned out to be wrong
  • Earn-out disagreement — the parties disagree on whether the agreed targets have been met, or whether the buyer has acted disloyally to avoid paying the earn-out
  • Purchase price adjustment — disagreement on the final adjustment under completion accounts
  • Breach of non-compete clause — the seller starts (or is suspected of starting) a competing business

What does the agreement typically say about this?

A good transfer agreement describes in advance how disputes should be resolved — often through an agreed process (e.g. an independent accountant for numerical disagreements) rather than straight to the courts. If a W&I insurance policy has been taken out, warranty claims typically go to the insurance company instead of directly against the seller.

Why are earn-out disputes particularly common?

Because an earn-out depends on future performance, which the buyer often has significant influence over after the takeover. The seller may suspect the buyer of deliberately deprioritizing the sold part of the business to avoid earn-out payments. Clear, measurable criteria — and an agreed reporting process — in the agreement itself is the best prevention.

What's the best path to a solution?

Just like with conflicts during the process itself, mediation is often faster and cheaper than litigation — and better preserves the possibility of continued collaboration, if the parties (e.g. via an earn-out period) still depend on each other.

32