Heiko Daniel Ziehms

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;

About this book: M&A Disputes and Completion Mechanisms provides an in-depth discussion of completion mechanisms in merger and acquisition (M&A) transactions, including key arguments for or against individual deductions or adjustments, identifies the factors that lead to post-M&A disputes and explains how to measure their financial consequences. In the course of an M&A transaction, the M&A professionals and their advisors face a series of decisions, often against the backdrop of an unrealistic deadline, imperfect information and a shrewd other side. In making these decisions, they have to deal with complex technical matters at the intersection of disciplines, including accounting, law, taxation, corporate finance, operations, environmental and strategy. It is not always possible during the negotiations to take a step back and contemplate issues that are likely to arise before or after completion that may result in a dispute or to address or mitigate risks. Further, a volatile 'real word' can - and often does - find its way into the transaction and cause dissonance - a cyberattack, turmoil in financial markets around closing as during the financial crisis, or the discovery of fraud, for example. It is therefore easy in these highly charged circumstances to create outcomes that end up in legal disputes. What's in this book: A sound understanding of the completion mechanism, including the basis and measurement of individual purchase price adjustments, is important to negotiate good deals and avoid disputes. This book deals with numerous matters that need to be addressed during M&A negotiations including the following: the equity bridge: from firm value to the purchase price for the equity; closing conditions, the closing process and the completion accounts; an in-depth discussion of individual purchase price adjustments from factoring to pensions and from leases to the working capital reference value; material adverse change clauses; aspects of locked box transactions, including the interest over the locked box period; how to structure earn-outs to avoid disputes; red flags for fraud; damages valuation in M&A disputes; and lessons learned on how to avoid or deal with disputes. The author analyses a large number of actual post-M&A disputes to bring into focus precisely where things go wrong in practice. He then sets out practical solutions to the problems dealmakers face, how to negotiate individual price adjustments and lessons learned from disputes. The analysis of prominent factors associated with legal disputes also provides diagnostic tools that can help avoid disputes. If a dispute has occurred, the book discusses how it can be resolved as well as the conceptual basis and practical approaches to the measurement of damages. How this will help you: This very useful book will be welcomed by M&A practitioners, be they in-house counsel, private equity, sovereign wealth funds, international arbitration centres or other players, as well as the investment bankers, accountants and the professionals who advise them. It will also prove to be of great value to those who deal with post-M&A disputes - judges, arbitrators and litigators - and legal academics interested in the M&A field, and to professionals who confront specific questions during a transaction or a post-M&A dispute.