Lawyer Monthly - January 2022 Edition

32 WWW.LAWYER-MONTHLY.COM | JAN 2022 2022 TRENDS OUTLOOK: M&A DISPUTES Times of economic turmoil have historically generated significant litigation activity. The COVID-19 pandemic and its economic fallout are no exception. They have resulted in a proliferation of litigation from M&A deals, and their impact is set to continue well beyond 2021. Here, we take a brief look back at key drivers and shifting trends in M&A litigation in the last year, and then do some crystal ball gazing about what we expect to see in the coming 12 months. Looking back The past 12 months have undoubtedly seen a boom in M&A disputes, in both the English courts and arbitration centres. Between 2019 and 2021, there has reportedly been a significant increase in High Court claims arising out of M&A transactions, and the last year has seen record numbers of claims filed at the London Court of International Arbitration (LCIA) and the International Chamber of Commerce (ICC), much of that driven by M&A activity. This uptick in M&A disputes appears to have been driven by a few factors. The most obvious, and most closely-related to the pandemic, can be loosely described as claims stemming from buyer’s remorse: buyers scouring boilerplate clauses for a way out when deals looked considerably less attractive after the pandemic hit (force majeure and material adverse change disputes being the clearest examples), looking to exploit ambiguities in the drafting of SPAs to their maximum advantage, and threatening to bring claims for misrepresentation, often angling to re-open the deal or re-haggle the price. Litigation has also been increasingly hard-fought, with Commercial Court judges reporting receiving more, lengthier applications in which parties attempt to take every point. But if we dig a little deeper, themes emerge which are unrelated (or at least far more loosely related) to the pandemic. To take a couple of examples, in recent times we have witnessed in the M&A market the more widespread adoption of warranty & indemnity insurance (W&I insurance), and buyers seeking more comprehensive coverage. Undoubtedly, this shift has supported those same buyers pursuing claims for breach of warranties and indemnities. It has also been a year in which ESG concerns have risen even further up the agenda of many corporates, including finding their way to the lawyers’ desks. This has become yet another area where parties have sought to gain advantage in M&A deals, particularly in looking to enforce ESG warranty breaches, such as where target companies have failed to maintain their own ESG targets. 2022 Trends Outlook: M&A Disputes Throughout 2021, Lawyer Monthly has closely followed M&A and IPO developments as they have occurred – and we expect to do the same in the year to come. This month we have the privilege of hearing from Ali Kirby-Harris, James Kennedy and Samantha Trevan, partners at Freshfields Bruckhaus Deringer, as they discuss key themes emerging from M&A disputes over the last year and look ahead to trends they expect to see in 2022.