Natalie Graham, Head of GBC Claims Advocacy – Financial, Professional & Specialty, Aon Risk Solutions; Dr. Michael Hammes, Director of PwC, Kai Schumacher, Managing Director of Alix Partners; and Prof. Dr. Holger Peres, partner at Beiten Burkhardt, together with panel head Christian von Sydow, partner at McDermott Will & Emery discussed the post M&A dispute resolution.
To begin, the panel noticed a trend towards more and more post M&A disputes. The panel identified several reasons for this development. The increasing values of the transactions render the perspective of post M&A disputes more and more interesting, all the more so because the sophistication of the buyers augments similarly. The panellists observed that after nearly every M&A transaction buyers could—if they wanted—find a reason to enter into a dispute to try to lower the purchase price retroactively.
The resulting post M&A disputes can end up in long lasting arbitration proceedings. To avoid and prepare for these kinds of proceeding beforehand, Prof. Dr. Peres advised all parties to implement directions and guidelines concerning pleading and other aspects directly in the M&A agreement.
Furthermore, the panel discussed whether proceedings before arbitration courts were preferable to litigation in state courts, as state courts possibly do not have the time or means to adapt to the needs of such disputes and concluded that both procedures have advantages and disadvantages. In addition, the panellists found the “locked box” as a purchase-price-determination formula to be preferable to “closing accounts” because the “locked-box” mechanisms reduce the ambiguities, which can then be used as the starting point of a post M&A dispute.
Financial statements, tax, material contracts, compliance with law and compliance guarantees were determined as typical reps and warranties, which are causes for disputes.
The panel closed with a discussion about experiences with alternative dispute resolutions and confirmed the increasing use of M&A insurance and the benefits for the contract partners. Finally, panel head Christian von Sydow convinced the other panelists—as well as the audience—that solving issues out of court always is preferable to court proceedings, if possible. This increases the flexibility in resolving the dispute and offers more possibilities to reach a favoured outcome.
Christian von Sydow,
McDermott Will & Emery