Cloud services provider Bulletproof has found itself in court over claims it deliberately managed a business it acquired in early 2016 so it would miss performance targets needed to trigger multi-million dollar earn-outs.
The ASX-listed hosting company acquired the business assets of New Zealand-based Cloud House in February last year for just under A$4 million.
Cloud House is an AWS partner that provides consulting, billing, and managed services for enterprises moving to the public cloud provider.
The acquisition gave Bulletproof a leg up into the New Zealand market; Cloud House forms the entirety of the provider's NZ operations.
The deal included a potential total of NZ$4.2 million (A$3.9 million) in earn-out payments if the business met certain revenue and profit performance targets in the periods ending December 31 2016, June 30 2017, and December 31 2017.
But Cloud House directors have taken Bulletproof to court claiming the company's management deliberately ran the business to make it miss its December 31 earn-out targets.
Bulletproof said Cloud House was also claiming to have been misled about Bulletproof's capabilities, customer base, and access to managed services.
Cloud House claims it has lost NZ$3.9 million (A$3.7 million) in potential earn-out payments as a result.
Bulletproof has called the claims "speculative and baseless" and hinted at retaliatory legal action.
"Bulletproof disputes the allegations made and has foreshadowed a counter claim against Cloud House in respect of Cloud House's financial position and projections in the course of the acquisition of the Cloud House business," it said in a statement.
It said it had looked into the matters raised in the claim and considered the lawsuit "to be without merit", pledging to "vigorously" defend itself.