Earnouts are often described as a way to bridge a valuation gap. But they can just as easily turn into a bridge to the courthouse. The Delaware Court of Chancery’s September 30, 2026 post-trial opinion in ACON Igloo Holdings, LLC v. Dometic Corporation, is a good example, and it should interest founders, sellers, private equity sponsors, and strategic acquirers alike.
The Deal: Coolers and a $223 Million Contingency
In October 2021, Dometic Corporation acquired cooler manufacturer Igloo from an affiliate of ACON Investments, a middle-market private equity firm. The purchase price included contingent earnout payments of up to $223 million tied to EBITDA. A payment was triggered if Igloo generated at least $75.25 million in EBITDA by year-end 2022, and the full $223 million earnout was payable if EBITDA exceeded $86.20 million. Igloo’s leadership had personal stakes too: CEO David Allen stood to receive up to $15.77 million, and CFO Robert Peak up to $2.31 million.
The stock purchase agreement included two sets of earnout-related covenants. The first obligated Dometic to conduct the business of Igloo under Allen’s authority during the earnout period in the ordinary course of business and consistent with ACON’s past practices. The second required Dometic to support Igloo as is reasonably necessary, in reasonable consultation with Allen, consistent with the manner in which Igloo’s business was conducted prior to closing.
The court recognized the inherent conflicting incentives: ACON and Igloo management wanted to maximize short-term EBITDA to hit the earnout, while Dometic had an interest in maximizing long-term stockholder value.
Proposed Discount Program and Dometic’s Response
Russia’s invasion of Ukraine pushed up oil prices in 2022, triggering a spike in the price of composite resin, a key material in Igloo coolers, resulting in a hit to EBITDA. As year-end approached, CEO Allen proposed price concessions to move excess inventory. He explained that Igloo was “sitting on 110 percent more inventory”. Dometic’s CEO Juan Vargues pushed back, noting that Allen had described only “minor concessions” two weeks earlier. Allen replied that he did not need Dometic’s “permission”.
Vargues then sent an email on October 23 which became the focus of the case. It reminded Allen that Igloo should be run “in the ordinary course of business consistent with the past practices,” that “[a]ny short term measures contradicting this principle must be approved by [Dometic],” and that Dometic did “not approve any short term actions, such as customer campaigns with discounted prices.” Allen then announced that Igloo would indeed not offer discounted inventory or price concessions for the rest of the year, and he acknowledged this would hurt Q4 revenue and EBITDA. Vargues was reportedly puzzled, because he had given no such direction on their Teams call.
ACON’s Claims: Ordinary Course, No-Avoidance, and the Implied Covenant
ACON argued that the earnout covenants were meant to “freeze time.” ACON asserted that, under its past practice, Igloo set an annual budget with EBITDA targets, monitored performance, and, when needed, implemented plans to bring performance back in line with those targets, including through pricing and other financial levers. ACON claimed that Dometic breached the ordinary course and “no avoidance” covenants by prohibiting Allen and his team from following through on their plans. The court disagreed.
Ordinary Course Covenant. The court held that the October 23 email “was not a bar on Allen’s authority to operate Igloo consistently with its past practices before the acquisition”. It found that Vargues “merely reminded” Allen of the ordinary course standard. ACON claimed Vargues “shut down Igloo’s plans,” but the court said Allen himself chose to cancel the proposed discounts. The court also quoted Allen telling ACON that shutting down promotions would “hurt [Igloo],” but that “may be the point.”
No-Avoidance Covenant. ACON argued that once Dometic saw Igloo might hit the earnout, it “escalated immediately” by routing the management proposals to its CFO and legal team and then issuing a “categorical veto” through the same email. Because the court had already read the email as a reminder of the contractual standard rather than a veto, this theory failed as well.
Implied Covenant. ACON’s fallback argument, that Dometic deprived it of “the fruits of its Earn-Out bargain,” ran into a familiar rule. The implied covenant “does not apply when the contract addresses the conduct at issue.” Here, the express covenants governed.
Dometic’s Counterclaims: Leaks Without Damages
Dometic did not do any better on offense. It claimed that ACON tortiously interfered with CEO Allen’s and CFO Peak’s confidentiality agreements and misappropriated trade secrets under the District of Columbia Uniform Trade Secrets Act. The court acknowledged “troubling disclosures of information to ACON by Allen (and, to a lesser degree, by Igloo’s CFO).” Even so, Dometic “proved no resulting injury”. For example, ACON had received substantially similar presentations from Igloo before the sale, so Dometic could not show that the later disclosures saved ACON the claimed $45,000 in design and production costs. On the trade-secret claim, Dometic failed to prove that either the underlying financial information or the analytical methodology in the “SKU and Customer EBITDA” presentations qualified as a trade secret.
Takeaways for Dealmakers
First, “ordinary course” does not freeze the business. An ordinary-course covenant that refers to past practice does not, by itself, give seller-side management free rein to chase the earnout. If sellers want protection against buyer interference, or want the right to run specific EBITDA-boosting programs, they should negotiate express operating covenants, approval thresholds, or pre-agreed business plans.
Second, the record matters, and transcripts matter most. ACON’s case faltered largely because relevant call transcripts and Allen’s own statements contradicted its account. Everyone involved in an earnout should assume their emails and recorded calls will become trial exhibits in a subsequent dispute.
Third, don’t count on the implied covenant to fill the gaps. When the purchase agreement directly addresses post-closing conduct, the implied covenant will rarely provide a second chance.
Fourth, confidentiality breaches still require proof of harm. Buyers dealing with sell-side management who stay in close contact with the former sponsor need evidence of actual injury, and they need information that truly qualifies as a trade secret, not just disclosures that look bad.
And finally, expect a long road. The case was filed in 2022, tried over three days in March 2026, and decided in September 2026. Earnout disputes are expensive, so deal teams should seek clear dispute-resolution mechanisms up front. ACON Igloo is a useful reminder that a well-drafted earnout can do more to prevent a dispute than to win one.
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