CD: To what extent have you seen an increase in M&A-related disputes in recent years? What are some of the common causes of such disputes?

Theau-Laurent: The number of M&A disputes we have seen has been stable in proportion to other disputes. Factors potentially leading to an increase in M&A-related disputes, such as the market downturn and the systematic inclusion of arbitration clauses in SPAs, have seemingly been offset by better-worded SPAs, the increased sophistication of parties involved and higher quality information. The typical causes of a dispute depend, in part, on the contemplated completion mechanism. For ‘locked-box’ transactions, where the equity price is fixed at signing on the basis of a historical balance sheet, the main causes are often fraudulent misrepresentation, ‘value leakage’ and breaches of other warranties, meaning that what the purchaser expected to receive, and paid for, never existed or was subsequently removed from the business. Where the purchase price can be adjusted between signing and closing according to contractual mechanisms, the main cause of disputes is often loose wording in the SPA.

Oct-Dec 2017 issue