Lawyer Monthly - December 2024

Nick Andrews An Interview with... Accounting Insights: Navigating W&I Claims with Forensic Expertise 34 LAWYER MONTHLY DECEMBER 2024 Warranty and Indemnity (W&I) claims are a common but often contentious aspect of mergers and acquisitions (M&A). These claims, which arise when a breach of contract is alleged regarding warranties made during the deal, can significantly affect the value of a transaction and the relationship between the parties involved. In this interview, Nick Andrews, a Forensic Accounting Partner at BDO LLP, offers his expert insights into the complexities of W&I claims and the vital role forensic accounting plays in resolving these disputes. Drawing on his 25 years of experience, Nick discusses key challenges, common pitfalls, and the evolving role of forensic accountants in M&A transactions, providing valuable guidance for companies navigating this intricate area of financial risk. With your extensive experience in forensic accounting, what key insights can you share about the nature of Warranty and Indemnity (W&I) claims in M&A transactions? Multiple surveys carried out by market participants have found that the most common type of W&I claim following an M&A transaction relates to the accounting warranties. In my experience, these most often relate to the last Accounts not showing a True and Fair view of the trading and/or the financial position of the target acquired. Other commonly alleged accounting breaches in W&I claims include claims relating to: i) asset values, such as the condition of fixed assets, the realisability of inventory and the recovery of receivables; ii) omission of liabilities, including contingent liabilities, from the Accounts; iii) fair and consistent presentation of management accounts; iv) consistency with IFRS and historical accounting practices and policies. A particularly contentious area that I have also seen relates to the warranted

RkJQdWJsaXNoZXIy Mjk3Mzkz