Earn-Out Dispute After a Company Sale in Turkey: How Can the Seller or Buyer Enforce the Agreement? (2026 Updated Guide)

Earn-out dispute after a Turkish company sale? Learn how sellers and buyers can enforce SPA earn-out clauses, challenge manipulated financial results, obtain company records and pursue payment or damages.

An earn-out allows part of the purchase price in a company sale to depend on the target company’s performance after closing. It can bridge a valuation gap between a seller expecting strong future performance and a buyer unwilling to pay the entire requested valuation upfront. However, earn-outs also create significant post-closing disputes. A seller may claim that the buyer deliberately reduced EBITDA, diverted customers, increased management charges or changed accounting policies to avoid additional payment. A buyer may argue that the agreed financial targets were never achieved, the seller’s calculation violates the Share Purchase Agreement, or exceptional items were improperly included in the earn-out calculation. In a Turkish M&A transaction, the outcome will depend heavily on the exact contractual formula, governing law, accounting rules, post-closing conduct, evidence and dispute-resolution mechanism contained in the transaction documents.

What Is an Earn-Out in a Company Sale?

An earn-out is a deferred and conditional element of the purchase price. Instead of paying the entire company value at closing, the buyer agrees to make an additional payment if specified post-closing targets are achieved.

Targets may be based on EBITDA, revenue, net profit, customer retention, sales volume, regulatory approvals, project completion or another measurable business milestone.

Why Do Earn-Out Disputes Arise?

The fundamental problem is that the seller’s payment is determined after the buyer has obtained control of the company.

The buyer may therefore control management decisions that directly affect the financial metrics used to calculate the seller’s earn-out.

This creates an inherent conflict of interest unless the SPA contains detailed protections.

Start With the Share Purchase Agreement

Before calculating damages or commencing proceedings, analyze the SPA carefully. The contract should be reviewed for the earn-out formula, measurement period, accounting principles, permitted adjustments, reporting obligations, access rights, management restrictions, dispute-resolution procedure and payment date.

The precise contractual wording will usually be more important than general assumptions about how earn-outs normally work.

Is the Earn-Out Formula Clear?

The formula should identify exactly how the additional consideration is calculated.

A clause stating merely that the seller receives additional payment if the business “performs successfully” can generate substantial uncertainty.

A stronger clause defines the financial metric, calculation methodology, measurement dates and relevant accounting principles.

EBITDA-Based Earn-Outs Create Particular Risks

EBITDA appears objective but can be affected significantly by accounting and management decisions.

Disputes may concern management expenses, group-company charges, exceptional costs, provisions, employee bonuses, restructuring expenses, related-party transactions or allocation of centralized services.

Each disputed adjustment should be examined individually.

Revenue-Based Earn-Outs Can Also Be Manipulated

Revenue may appear easier to calculate, but disputes can still arise.

A buyer may delay invoicing, transfer customers to another group company, change sales channels or restructure contracts in a way that reduces revenue recorded by the acquired company.

The seller should therefore examine the economic substance of post-closing transactions.

Accounting Policies Are Critical

The SPA should specify the accounting principles applicable to the earn-out calculation.

If the buyer changes accounting policies after closing, determine whether the agreement permits the change and whether it affects comparability with the historical financial statements used when the transaction was negotiated.

Can the Buyer Change the Business After Closing?

Normally, ownership gives the buyer significant control over the acquired company. However, the SPA may impose contractual restrictions designed to protect the earn-out.

These can include obligations to operate the business consistently, restrictions on diverting customers, limits on related-party transactions and requirements concerning investment or staffing.

Buyer Conduct Can Become Central to the Dispute

A seller may argue that the buyer deliberately operated the business to prevent the earn-out target from being achieved.

The legal analysis should compare the buyer’s actual conduct with express contractual obligations and applicable principles governing performance of contractual obligations.

Customer Diversion Should Be Investigated

If major customers stopped purchasing from the target company but began buying from another company within the buyer’s group, investigate the transactions carefully.

Customer lists, invoices, CRM records and intercompany sales information can become important evidence.

Related-Party Charges Can Reduce the Earn-Out

After acquisition, a buyer may introduce management fees, licensing charges, financing costs, IT charges or other group-company expenses.

Determine whether these charges are permitted under the SPA and how they should be treated under the earn-out formula.

Management Salaries and Bonuses May Be Disputed

A substantial increase in executive compensation during the earn-out period may reduce profitability.

The seller should determine whether the SPA regulates extraordinary remuneration or requires the business to be operated consistently with historical practices.

Restructuring Costs Can Distort Performance

The buyer may integrate the target into a larger group, close facilities, terminate employees or reorganize operations.

If those actions generate exceptional expenses during the earn-out period, determine whether those costs should be included in the contractual calculation.

Buyer Investment Can Create the Opposite Problem

Not every post-closing expense represents manipulation. A buyer may legitimately invest in employees, equipment, compliance or expansion.

The seller cannot necessarily demand that the buyer sacrifice legitimate business interests merely to maximize the earn-out unless the contract imposes such obligations.

Sellers Can Also Manipulate Earn-Out Calculations

The dispute is not always caused by the buyer.

Where the seller remains involved in management during the earn-out period, the buyer may allege premature revenue recognition, artificial sales, excessive discounting, delayed expenses or transactions designed solely to reach the target.

Examine the Seller’s Continuing Management Role

If the seller remained a director, executive or consultant after closing, review the management agreement alongside the SPA.

Authority, reporting obligations and conflicts of interest can become important.

Obtain the Earn-Out Calculation

The party responsible for preparing the calculation should provide the contractual statement or report required by the SPA.

The opposing party should compare every material adjustment with the agreement.

Do Not Challenge the Calculation With a General Objection

A seller should not merely state that the earn-out is “too low.”

Prepare a calculation showing the amount claimed, disputed adjustments and contractual basis for each correction.

The buyer should use the same approach when rejecting the seller’s demand.

Financial Records Are Essential Evidence

Relevant evidence may include management accounts, general ledgers, invoices, bank records, customer contracts, sales reports, budgets, board documents and related-party transaction records.

The evidentiary strategy should begin before litigation or arbitration where possible.

Access-to-Information Rights Matter

Well-drafted SPAs commonly provide the seller with access to information needed to verify the earn-out.

If the buyer refuses access, determine whether that refusal itself breaches the transaction documents.

Electronic Evidence Can Be Important

Emails, internal messages, financial-system records and board communications may reveal why particular commercial decisions were made.

Evidence should be preserved lawfully and in a manner that allows its authenticity to be demonstrated.

Internal Buyer Communications May Become Relevant

If the seller alleges intentional manipulation, documents concerning customer transfers, restructuring or accounting changes may become particularly important.

The dispute should therefore be approached as both a contractual and evidentiary matter.

An Independent Accountant May Be Required

Many SPAs provide for disputed calculations to be referred to an independent accountant or expert.

The agreement should determine whether the expert acts as an expert determiner or within another dispute-resolution mechanism and which issues fall within that person’s authority.

Expert Determination and Arbitration Are Different

A financial calculation dispute may be assigned to an accountant while broader contractual issues are assigned to arbitration or courts.

For example, an accountant may calculate EBITDA, but an arbitral tribunal may need to determine whether the buyer breached an obligation not to divert business.

Follow the Contractual Dispute Procedure

If the SPA requires an objection within a specified period, the party disputing the calculation should comply with that procedure.

Missing a contractual notice deadline can create unnecessary procedural arguments.

Notice Provisions Must Be Checked

Determine how notices must be delivered, to which addresses and when they are deemed received.

A commercially important earn-out claim should not depend on an informal message where the SPA requires formal notice.

Governing Law Must Be Identified

An acquisition involving a Turkish target may contain Turkish law or foreign governing law.

The legal analysis should begin with the governing-law clause rather than assuming Turkish substantive law automatically governs every contractual question.

Dispute Resolution Must Also Be Identified

The SPA may provide for Turkish courts, foreign courts, domestic arbitration or international arbitration.

The seller or buyer should determine the correct forum before taking substantive enforcement action.

Can the Seller Demand Payment Directly?

If the contractual conditions have been satisfied and the earn-out amount is due and determinable, the seller may pursue payment through the remedy available under the contract and governing law.

However, where the calculation itself is disputed, the contractual determination mechanism may need to be completed first.

Can the Seller Claim Damages?

Potentially, depending on the governing law, contractual provisions and facts.

If the buyer breached an obligation concerning operation of the business and that breach reduced the earn-out, the seller may seek remedies based on the resulting loss.

Causation will be particularly important.

Proving the Counterfactual Can Be Difficult

The seller may need to demonstrate what the earn-out would have been if the alleged breach had not occurred.

This may require financial modeling and expert evidence.

Can the Buyer Defend Against an Inflated Earn-Out Claim?

Yes. The buyer should demonstrate the correct calculation under the SPA and identify any seller assumptions that conflict with the agreed methodology.

Contemporaneous financial records are generally stronger than calculations created only after the dispute begins.

Fraud or Misrepresentation May Create Additional Claims

If the earn-out dispute reveals that pre-closing financial information was deliberately inaccurate, separate warranty, indemnity, misrepresentation or fraud-related issues may arise depending on the transaction documents and applicable law.

These should be distinguished from the ordinary earn-out calculation.

SPA Warranty Claims May Have Different Deadlines

Do not assume the earn-out dispute period also governs warranty claims.

Transaction agreements often contain separate notification and limitation mechanisms for different categories of claims.

Escrow and Holdback Arrangements Should Be Reviewed

Some transactions secure deferred purchase-price obligations through escrow, holdback or another security mechanism.

Determine whether the seller can claim against those funds and what documentation is required.

Parent Company Guarantees May Be Important

If the acquisition vehicle has limited assets, review whether another group company guaranteed the buyer’s payment obligations.

Enforcement strategy should consider the actual creditworthiness of the obligor.

Interim Measures May Be Necessary

Where there is a credible risk that assets will be transferred or evidence destroyed, available interim legal protection should be assessed promptly.

The precise remedy depends on the forum, governing law and circumstances.

Foreign Buyers Should Preserve Turkish Company Records

Where the target is a Turkish company, accounting, corporate and operational records may become central to the dispute.

Post-acquisition integration should not result in destruction of records relevant to the earn-out period.

Foreign Sellers Should Act Before Information Disappears

A seller that no longer controls the target should not wait years before investigating suspicious financial results.

Management changes, employee departures and IT migrations can make evidence increasingly difficult to obtain.

Tax Treatment Should Be Reviewed Separately

An earn-out payment can also create tax and accounting consequences.

These issues should be coordinated with appropriate financial and tax professionals but should not be confused with the contractual entitlement itself.

Mediation May Be Commercially Useful

Some earn-out disputes can be resolved through negotiated adjustment because both parties may wish to avoid extensive disclosure of commercially sensitive information.

A settlement can also preserve relationships where the seller remains involved in the business.

Arbitration Can Be Suitable for Cross-Border M&A Disputes

International transactions frequently use arbitration because disputes may involve foreign shareholders, confidential financial information and cross-border enforcement.

The arbitration clause should be analyzed carefully before proceedings begin.

Enforcement of a Foreign or Arbitral Decision in Turkey

Where the losing party or relevant assets are located in Turkey, recognition and enforcement issues may arise depending on the nature and origin of the decision.

Enforcement planning should therefore begin before the merits dispute is completed.

How Can Future Earn-Out Disputes Be Prevented?

The SPA should define the formula with mathematical precision, specify accounting principles, regulate exceptional items, control related-party charges, protect information rights and establish a clear dispute-resolution mechanism.

The contract should also address how the business may be operated during the earn-out period.

2026 Practical Strategy for Sellers

A seller who believes the earn-out has been artificially reduced should immediately obtain the contractual calculation, preserve the objection deadline, request financial records, identify unusual post-closing transactions, compare accounting policies, investigate related-party charges and customer transfers and calculate the amount that would have been payable without the disputed adjustments.

2026 Practical Strategy for Buyers

A buyer facing an earn-out claim should preserve contemporaneous business records explaining its management decisions, reconcile the calculation with the SPA, distinguish legitimate commercial decisions from prohibited conduct and respond specifically to each alleged adjustment.

Frequently Asked Questions

What is an earn-out?

An earn-out is a conditional part of the purchase price payable after closing if specified financial or operational targets are achieved.

Can a buyer deliberately reduce profits to avoid paying an earn-out?

The answer depends heavily on the SPA and governing law. Conduct inconsistent with express contractual protections may create liability.

Can a seller inspect the company’s financial records?

This depends on contractual information and audit rights and any other applicable rights. The SPA should be reviewed immediately.

Can management fees paid to the buyer’s group reduce EBITDA?

Potentially, but their treatment depends on the earn-out formula and contractual provisions governing related-party charges.

What if the buyer changes accounting policies?

The effect depends on the SPA. If the agreement requires consistency with historical accounting policies, the change may become a central dispute.

Who decides the correct EBITDA calculation?

Many SPAs provide for an independent accountant or expert, while broader contractual disputes may be decided by courts or arbitration.

Can the seller claim damages in addition to the earn-out?

Potentially, where a separate contractual breach caused additional loss and the governing law and transaction documents permit the claim.

Can the buyer challenge an artificially inflated seller calculation?

Yes. The buyer can rely on the contractual formula, accounting records and transaction evidence to challenge unsupported adjustments.

What evidence is most important?

The SPA, financial records, ledgers, customer transactions, related-party charges, board documents, emails and contemporaneous accounting evidence can all be important.

What should the seller or buyer do first?

Review the SPA before calculating the claim. Identify the earn-out formula, accounting rules, information rights, objection deadline and dispute-resolution mechanism, and then reconstruct the calculation from contemporaneous financial evidence.

Client-Focused Legal Support for Earn-Out and M&A Disputes

Fırat Fesih Kaya Law Office assists foreign investors, shareholders, sellers and buyers in cross-border company-sale disputes involving earn-outs, deferred purchase prices, SPA breaches, purchase-price adjustments, escrow arrangements, indemnity claims and post-closing shareholder disputes. Lawyer Fırat Fesih Kaya provides legal assistance in analyzing transaction documents, reviewing disputed financial calculations, preserving evidence, negotiating post-closing claims and pursuing litigation, arbitration and enforcement remedies where necessary.

Phone: +90 312 434 22 22

Mobile / WhatsApp: +90 532 769 22 22

Email: info@firatfesihkaya.av.tr

Address: Mevlana Boulevard No:221, Yıldırım Tower, Office No:148, 06520 Balgat, Çankaya, Ankara, Turkey