What protections does a seller have against a buyer suppressing earnings during an earn-out?

A seller's protection here comes almost entirely from what is negotiated and written into the earn-out provisions before closing, rather than from any automatic legal safeguard against a buyer's ordinary business decisions afterward. Common protections include operating covenants requiring the buyer to run the target business in the ordinary course, or consistent with past practice, restrictions on diverting customers, contracts, or opportunities away from the target toward other parts of the buyer's operations, and a defined, consistent accounting methodology that cannot be changed unilaterally in a way that reduces the calculated metric.

Sellers also commonly negotiate access to the target's financial records during the earn-out period, so they can independently verify the calculation rather than relying entirely on figures the buyer produces, and sometimes an express covenant that the buyer will not act in a manner intended to reduce or avoid the earn-out. Without these specific protections built into the agreement, a seller generally has limited ability to challenge a buyer's ordinary, good-faith business decisions simply because they happen to lower the earn-out payment.