M&A Disputes: How They Happen, How to Resolve Them, How to Avoid Them

Heiko Daniel Ziehms

oct. 2023 · Kluwer Law International B.V.

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M&A disputes, which range from breach of warranty and fraud claims to disagreements over price adjustments, earn-outs, material adverse change clauses and many others – are more common than many participants in M&A transactions may realise. They can take years to resolve and cost many millions of pounds, euros, or dollars. A dispute can adversely affect the post-transaction environment and hence the prospects of a successful acquisition or, at worst, frustrate a deal entirely. It is therefore vital to understand how such disputes happen, how they can be resolved, and how to avoid them, or at least minimise the potential for an M&A dispute. This indispensable practice guide provides not only a comprehensive discussion of the ‘mechanics’ of M&A transactions and purchase price adjustments but also a deeply informed analysis of what goes wrong in deals that leads to disputes and how to avoid (or resolve) such eventualities.

Originally intended as a second edition of the author’s well-known M&A Disputes and Completion Mechanisms, published in 2018, this is in fact a new book, drawing on a new set of experiences and observations taken from a period where the scope for M&A disputes has intensified. Framed as an in-depth discussion of typical questions that confront those who assess financial and accounting issues in M&A disputes, including the question of damages, the analysis expertly investigates the pitfalls that can arise in such components of the process as the following:

• the completion mechanism, including the rationale and basis of measurement of individual purchase price adjustments and the locked box;

• the role of accounting information in presenting, or misrepresenting, the underlying economic reality of a business and in informing a valuation;

• valuation principles, standards of value, and valuation methods used for M&A disputes;

• valuation matters specific to M&A disputes, including the question of value vs. price and the choice of counterfactuals;

• material adverse change clauses; and

• ‘red flags’ for fraud.

A concluding chapter distils ‘lessons learned’ into a short, practical commentary drawing on the author’s extensive experience of M&A- and related disputes, with recommendations that plot a clear path to avoidance of disputes.

With its sound understanding of the completion mechanism, including an extensive discussion of measurement of individual purchase price adjustments, the locked box, and how to identify fraud, this practical and up-to-date guide, grounded in corporate finance theory, will be a valuable resource to all those who work on M&A transactions, whether as principal, adviser, insurer, funder, independent expert, judge, or arbitrator..