These disputes are often resolved through arbitration, litigation, or negotiation. Common forums include ICC arbitration, LCIA arbitration, or specialized accounting tribunals for post-closing adjustments. Early identification of risks, clear contract drafting, and use of expert witnesses are critical to resolving M&A disputes effectively.
Breach of Representations and Warranties
Material Adverse Change (MAC) Clause
Post-Closing Performance Metrics: Disputes over how earn-out metrics (e.g., revenue, EBITDA) are calculated or whether the agreed targets have been met.
Accounting Practices: Differing interpretations of GAAP or other accounting standards impacting financial performance.
Buyer Control: Claims that the buyer acted in bad faith to depress performance metrics and avoid earn-out payouts.
Post-closing Purchase Price Adjustment
Working Capital Disputes: Disagreements over the final working capital adjustment calculation at closing.
Debt and Cash Adjustments: Differences in calculating net debt or excess cash at closing.
Inventory and Asset Valuations: Disputes over fair market value determinations for inventory, real estate, or other assets.
Overpayment Allegations: Claims that the buyer overpaid due to inflated valuation metrics or incomplete disclosures.
Price Adjustment Mechanisms: Challenges regarding adjustments based on financial or operational benchmarks agreed upon during negotiations.
Fraud and Misrepresentation
Intentional Concealment: Allegations of fraudulent concealment of critical risks or liabilities.
Data Integrity: Disputes arising from falsified financial statements, inaccurate reporting, or hidden debts.
Disputes Over Indemnities
Scope of Indemnities: Differing interpretations of indemnity clauses (e.g., what is covered and to what extent).
Caps and Thresholds: Arguments over indemnity limits, deductibles, or de minimis thresholds.
Third-Party Claims: Disputes over indemnification for third-party claims, such as environmental or intellectual property liabilities.
Corporate Governance and Leadership Transition
Control Struggles: Disputes over board composition, leadership decisions, or operational control post-acquisition.
Key Personnel Departures: Conflicts when critical employees leave or fail to fulfill their transition commitments.
Cultural Integration Issues: Mismatched corporate cultures leading to operational challenges and disputes.
Regulatory and Antitrust Issues
Deal Delays or Termination: Disputes arising from failure to obtain regulatory approvals or antitrust clearance.
Fines and Sanctions: Liability disputes over penalties or conditions imposed by regulatory authorities.
Disputes Over Confidentiality and Non-Compete Clauses
Breach of Confidentiality: Unauthorized use of sensitive information shared during due diligence.
Non-Compete Violations: Claims that sellers or executives violated non-compete agreements post-transaction.
Joint Venture and Shareholder Agreement Disputes
Governance and Voting Rights: Conflicts over decision-making authority and minority shareholder protections.
Exit Terms: Disputes over valuations or terms in buy-sell or drag-along/tag-along agreements.
