Earn-out Not Disputed in Time: Dutch SPA Deadlines Matter

Earn-outs are often used to bridge valuation uncertainty in M&A transactions. In Dutch transactions, however, the outcome of an earn-out dispute may depend as much on the SPA procedure as on the financial merits.

A recent judgment of the Amsterdam District Court illustrates this clearly. The buyer argued that no earn-out was due for 2023 and raised substantive objections to the sellers’ calculation. But the buyer did not follow the contractual dispute procedure in time. The court applied the SPA strictly. The sellers’ calculation became final and binding, and the buyer was ordered to pay more than €4.1 million.

For international buyers, sellers, private equity funds and advisers involved in Dutch M&A, the case is a useful reminder: Dutch courts can enforce earn-out procedures strictly, especially where professional parties have agreed detailed SPA mechanics with legal assistance.

This article is part of the ViottaLaw series on Dutch M&A deal practice, Dutch private equity transactions and management rollover in Dutch private equity deals.

What happened?

The case concerned the sale of Star Apple Holding B.V., a group active in IT sector business mediation. The shares were sold to Beryllium B.V., part of the HeadFirst Group. The purchase price consisted of a fixed amount of more than €12.6 million and a variable component: an earn-out for 2022 and 2023.

The dispute concerned the 2023 earn-out. The buyer said that no earn-out was due. The sellers disagreed and claimed an earn-out of €4,173,548.

The SPA contained a clear procedure:

• the buyer had to prepare an Earn Out Statement;
• the sellers could dispute that statement within twenty business days by sending a Sellers Notice of Disagreement;
• if the buyer disagreed with the sellers’ notice, it had to send a Purchaser’s Notice of Disagreement within twenty business days;
• if the buyer failed to do so, the statement as adjusted by the sellers would become final and binding.

The sellers submitted their Sellers Notice of Disagreement in time. They also expressly reminded the buyer that it had twenty business days to submit a Purchaser’s Notice of Disagreement.

The buyer did not do so in time.

What did the Amsterdam District Court decide?

The court enforced the SPA procedure strictly. The key findings were:

• the SPA contained a clear procedure for determining and disputing the earn-out;
• the buyer failed to submit a Purchaser’s Notice of Disagreement within the agreed deadline;
• the earn-out statement as adjusted by the sellers therefore became final and binding;
• the buyer could not freely raise its substantive objections later in court;
• the buyer’s reliance on reasonableness and fairness failed;
• the parties were professional parties assisted by lawyers;
• the short contractual deadlines served legal certainty;
• the buyer had been expressly reminded of the next procedural step.

The result was clear: the 2023 earn-out was awarded.

Dutch law context: earn-outs are contractual mechanisms

Dutch law does not contain a detailed statutory regime for earn-outs in M&A transactions. An earn-out is mainly a contractual mechanism. The SPA determines:

• how the earn-out is calculated;
• who prepares the earn-out statement;
• what information must be provided;
• how and when objections must be made;
• when a statement becomes final and binding;
• whether disputes go to an independent accountant, expert, arbitrator or court.

Dutch contract law allows room for interpretation. Courts may consider wording, context, party intentions and circumstances. But in commercial M&A agreements between professional parties advised by lawyers, the wording and structure of the SPA often carry significant weight.

That is what happened here. The procedure was clear, the deadline was explicit, and the consequence of missing the deadline was agreed.

Why substantive objections were not enough

The buyer argued that the sellers had applied incorrect normalisations, shifted revenue and influenced the results in a way that caused the earn-out threshold to be met.

Those points may have been commercially important. But procedurally they came too late.

The SPA required the buyer to raise its objections through a timely Purchaser’s Notice of Disagreement. Because the buyer failed to do so, it could not later reopen those objections freely in court.

For deal practice, this is the central lesson. A party may have an accounting, EBITDA or conduct-based objection, but if the SPA requires that objection to be raised in a specific notice within a specific period, the procedural step can decide the outcome.

Reasonableness and fairness did not save the buyer

Under Dutch law, contractual rights and obligations may be affected by reasonableness and fairness. In exceptional cases, reliance on a contractual provision may be unacceptable.

But this is not an easy escape from a missed SPA deadline.

The court considered it relevant that the parties were professional parties, had legal advisers and agreed a detailed earn-out process with clear consequences. The sellers were allowed to rely on that process.

For international parties, this is important. Dutch law recognises reasonableness and fairness, but a Dutch court will not lightly use that principle to override clear M&A documentation between sophisticated parties.

Additional points: bad leaver and rollover

The judgment also contained useful reminders on bad leaver and rollover arrangements.

The buyer argued that certain managers should be treated as bad leavers. The court rejected this. The SPA and definitions schedule specified when a manager qualified as a bad leaver. If the buyer wanted management effort, performance or contribution to affect leaver status, the documents should have said so clearly.

There was also a dispute about rollover arrangements. The sellers argued that alternative arrangements had been agreed through emails, WhatsApp messages and draft documents. The court rejected that claim. The SPA required amendments to be agreed in writing, and the informal correspondence was not enough.

The practical point is straightforward: leaver provisions must be drafted precisely, and rollover arrangements should be formally documented.

What this means for Dutch M&A practice

The judgment confirms several practical points for earn-outs under Dutch law.

• Monitor earn-out deadlines after closing.
  Earn-out deadlines often arise months or years after completion, when the original deal team is less involved.
• Treat notices as transaction-critical documents.
  A notice must be timely, correctly delivered and sufficiently specific.
• Define the dispute route clearly.
  The SPA should say whether disputes about calculations, EBITDA adjustments, revenue recognition, accounting policies, management conduct or legal interpretation go to an expert, accountant or court.
• Take final-and-binding provisions seriously.
  If the SPA says that a statement becomes final and binding after a missed objection deadline, a Dutch court may enforce that consequence.
• Align management obligations with earn-out and leaver provisions.
  If management performance affects earn-out rights, rollover equity or bad leaver status, the documentation must say so clearly.
• Document rollover changes formally.
  Emails, WhatsApp messages and draft documents may not be enough if the SPA requires written amendments.

Practical drafting points for Dutch earn-outs

A strong earn-out clause should do more than include a formula.

The SPA should define the financial metric, such as revenue, EBITDA, ARR, gross margin or another KPI. It should also address accounting policies, normalisations, exceptional items, intra-group charges, management fees, bonuses, cost allocations and revenue recognition.

The SPA should then set out the process. Who prepares the statement? When must it be delivered? What supporting information must be provided? How must objections be made? What must the notice contain? When does the statement become final?

The role of an independent accountant or expert should also be clear. Can the expert only correct calculations, or also decide accounting principles, EBITDA adjustments and revenue allocation? Are legal questions reserved for the court?

Finally, the earn-out should be aligned with post-closing control. If the buyer controls the company during the earn-out period, the sellers may need information rights and protections against conduct that could affect the earn-out.

Conclusion

The Amsterdam District Court judgment shows that earn-outs in Dutch M&A are not only financial mechanisms. They are procedural mechanisms.

If parties agree a detailed process for determining and disputing an earn-out, that process must be followed. A missed notice deadline can be decisive. In this case, failure to submit a timely Purchaser’s Notice of Disagreement resulted in an earn-out of more than €4.1 million becoming payable.

For buyers, the lesson is clear: monitor earn-out deadlines as carefully as closing conditions. For sellers, a well-drafted notice mechanism can provide real protection. For advisers, earn-out provisions deserve more attention than they often receive.

FAQ

Are earn-outs common in Dutch M&A?

Yes. Earn-outs are often used where buyer and seller disagree on valuation or where future performance is uncertain.

Are Dutch earn-outs governed by specific statutory rules?

No. Earn-outs are primarily contractual. The SPA determines the calculation, procedure, deadlines, information rights and dispute resolution mechanism.

Can a Dutch court enforce a missed earn-out deadline strictly?

Yes. Especially in commercial M&A transactions between professional parties advised by lawyers, Dutch courts may enforce clear contractual deadlines and final-and-binding mechanisms.

Can reasonableness and fairness override the SPA?

Only in exceptional circumstances. It is not an easy escape from a missed contractual deadline in a negotiated SPA.

What should international buyers watch?

International buyers should focus on notice deadlines, objection requirements, independent expert procedures, accounting policies, post-closing control, management obligations and the consequences of missing a deadline.

About Dirk de Waard

Dirk de Waard is a Dutch corporate and M&A lawyer and partner at Venture Lawyers in Amsterdam. He advises founders, investors, private equity funds, buyers, sellers and management teams on Dutch M&A transactions, SPA negotiation, earn-outs, management rollover, shareholder arrangements, governance and cross-border deal implementation.

Structuring an earn-out, SPA or management rollover in the Netherlands?

Earn-outs can be useful, but only if the formula, procedure, deadlines, information rights and dispute resolution mechanism are drafted properly. A poorly monitored earn-out process can create significant post-closing disputes.

Dirk de Waard advises buyers, sellers, founders, management teams and investors on Dutch M&A transactions, earn-out arrangements, SPA negotiation and deal implementation. Contact Dirk at dirk.dewaard@viottalaw.com to discuss the Dutch legal implementation of an earn-out or M&A transaction.