GOOD DEALS GONE BAD – LESSONS LEARNED FROM RECENT M&A DISPUTES
The global economic outlook in 2023 is bleak. Ongoing geopolitical tensions between the US and China, increasing inflation, lasting disruptions to supply chains and the war in Ukraine are but a sample of news items that continue to dominate headlines. Against this backdrop, the Financial Times recently reported that some of the world’s biggest companies are facing multibillion-dollar write-downs on recent acquisitions, as the era of frenzied dealmaking gives way to increasing economic uncertainty.
Unsurprisingly, the number of disputes over M&A is expected to increase. So, what happens when a good deal goes bad? In this article, we provide an introduction to the types of disputes that commonly arise in a cross-border M&A context, followed by some lessons learnt from recent matters.
The world of M&A disputes
M&A disputes are as varied as the deals that give rise to them. They turn on factors such as the type of company involved, the jurisdictions and industries in which they operate, the acquisition structure (e.g., share sale, asset sale and merger, etc.), the sale process (e.g., auction sale or private treaty) and, of course, the terms of the acquisition documents (including things like the governing law). That said, we see certain types of disputes arising more commonly than others.
Conditions precedent
While many acquisition agreements are signed and closed simultaneously, others impose a gap between signing and closing where certain conditions must be fulfilled before the target can legally be transferred. These conditions vary considerably but can include the need to obtain foreign investment approval, approval from competition authorities, approval by shareholders, waiver of pre-emption rights, consents from contractual counterparts (particularly where there are change of control restrictions) and discharge of security over the target’s assets or shares.
Apr-Jun 2023 issue
Ashurst LLP