Filing Objections to Buyer Prepared Post Closing Earn out Statements
File post-closing earn-out objections within strict review windows using itemized, quantified accounting adjustments that satisfy contractual materiality thresholds.
Purchase Price Dispute
Meaning
Post-closing conflicts arise when the buyer and seller cannot agree on the final financial adjustments calculated after the transaction has closed. A purchase price dispute usually centers on the valuation of net debt, working capital, or inventory on the closing date balance sheet. This disagreement must be resolved using the specific procedures outlined in the acquisition agreement to avoid litigation.
Dispute Mechanics
Most disagreements of this kind start when the seller objects to the buyer’s post-closing financial statement. If the seller believes the buyer used incorrect accounting policies to reduce the final price, the seller files a formal notice of a purchase price dispute. This action initiates a negotiation period where both finance teams attempt to reconcile the differences.
Resolution Clause
Share purchase agreements include a clause that refers any unresolved purchase price dispute to an independent accounting firm. This expert conducts a review of the workpapers and makes a binding determination on the disputed items. This procedure prevents the dispute from turning into a costly court battle.
Escrow Protection
Holding a portion of the purchase price in an escrow account secures the funds needed to settle the dispute. This reserve ensures that the winning party receives their payment without having to sue the other side.