Dometic Group’s Acquisition of Igloo: Ordinary Course Covenant Disputes in Earnouts

A private equity firm bought a category leading cooler brand and attempted 4th quarter heroics to hits its EBITDA target and achieve an all-or-nothing earnout. The buyer refused to give its approval to those efforts and won at trial when the seller sued.

In ACON Igloo Holdings, LLC v. Dometic Corporation, decided on September 30, 2026, Delaware Vice Chancellor Will dismissed ACON’s claims against Dometic that, among other things, it breached the ordinary course covenant.

In 2021, Dometic Corporation (“Dometic”), an acquisitive Swiss company with an expertise in outdoor products, purchased the cooler brand Igloo from ACON Investments, LLC (“ACON”), a middle market private equity firm, via a combination of $677MM in cash and a maximum $223MM in post-closing adjustments and earnout. The earnout required Igloo achieving $75.25MM in EBITDA between December 25, 2021 and December 31, 2022.

Post-closing, due to increased costs in shipping and materials, EBITDA was forecasting by Q3 at 28% below expectations. ACON and Igloo contemplated a range of actions, including ACON purchasing $20MM in igloos themselves and giving them away, to offering discounts that were never before offered in the ordinary course, including to Igloo’s largest customer, Walmart, in an exchange for increased volume purchases in Q4. ACON pursued the latter, which Dometic forbid because it would have negatively impacted 2023 profitability and beyond long-term. Then ACON sued, alleging that these were actions it would have taken had it had full control of the business, as it would in the past. The case hinged on whether the proposed actions would be in the ordinary course:

The court said:

“Ordinary course” conduct means conduct undertaken “in the regular course of events.”The Purchase Agreement ties this standard to ACON’s “past practices” in “conduct[ing]” Igloo’s business. Delaware courts have observed that a covenant to operate “in the ordinary course of business and consistent with” past practices “imposes an unconditional obligation.”…The trial record demonstrates that [the CEO’s] proposed measures were not ordinary course actions consistent with past practices. They were last-ditch efforts coordinated with ACON and its counsel to either achieve the earnout through unusual pricing and sales strategies or force a renegotiation. The very titles of [the CEO’s] scenarios—“Deliver Earnout” and “Optimize Long Term Value”— make that plain.

Earnouts typically have several covenants, including an ordinary course covenant, which is binding on the party who controls the company post-close to operate the company consistently with how it has been in the past.

The seller erred in agreeing to a higher all-or-nothing earnout target that eventually became impossible to win in the ordinary course, rather than negotiating a tiered earnout structure that offered silver and bronze medals as well.

Jerome Fogel is a founding partner of Fogel & Potamianos LLP, a firm recognized by Chambers & Partners’ California Spotlight Guide for excellence in corporate law. A partner in the Corporate Practice Group and Chair of the Sports & Entertainment Group, he is known as an innovator and dealmaker in the legal community. He serves as a general counsel to privately held companies with a specialty in mergers and acquisitions.

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