Jan 272026
Delaware Supreme Court Makes Earnouts Less Risky For Buyers
Earnout Decision Partially Reversed Because Buyer Did Not Have to Pursue an Alternative Regulatory Pathway
Earnouts are a common feature of life sciences deals, and a 2024 Chancery Court decision had increased the financial risk for buyers agreeing to an earnout. However, the Delaware Supreme Court’s partial reversal of Johnson & Johnson v. Fortis Advisors LLC has addressed this issue by limiting the application of the implied covenant of good faith and fair dealing.
Earnout Decision Partially Reversed Because Buyer Did Not Have to Pursue an Alternative Regulatory Pathway