valuation process and how that evolved over time during the transaction, as more information came in. Looking ahead, how do you foresee the role of forensic accountants evolving in relation to W&I claims and M&A disputes in the coming years? One aspect of M&A disputes that could see a change is an increase in the trend towards alternative dispute resolution (ADR) as a means of resolving disputes. This is already happening in relation to completion accounts and earnout disputes, where the use of independent determination by expert accountants has been common for many years. Turning specifically to W&I claims, it is possible that in order to avoid long drawn-out formal litigation or arbitration processes, there will be a movement towards other forms of ADR. In recent years, I have been involved in a number of W&I claims, where the process has lasted three or four years before an outcome has been reached, which feels too long for all concerned. Looking at the art of the possible, rather than arriving at a prediction, two forms of ADR which may be attractive in such situations are double-headed expert determination and adjudication. The former would involve a named duo of an expert W&I legal practitioner and an expert forensic accountant working together to determine respectively the two aspects of breach/causation and quantum of loss. Adjudication, which could be for smaller and less complex claims, could be designed in a similar way to adjudications commonly used to resolve disputes in the construction sector. The adjudicator could be a lawyer, insurance industry professional or a forensic accountant, provided both parties could agree on such a person. WWW.LAWYER-MONTHLY.COM 37 In your experience, what are the most critical factors that can influence the outcome of a W&I claim? In order to succeed with a W&I claim, whether an insured claim or not, a claimant needs to demonstrate breach, causation and loss. Ultimately, the outcome will come down to the terms within the W&I contract, whether just the SPA, or also the insurance policy in insured cases. Factors that can influence the outcome include a clear description of and rationale for the alleged breach, backed up by supporting contemporaneous evidence, preferably documentary in nature. Then, as regards causation, the claimant needs to be able to demonstrate why the breach has caused it to suffer loss. Finally, as regards quantum of loss, the claimant will need to substantiate with evidence how it has arrived at its claimed loss figure. This is where expert accounting support is important, to assess the quality and relevance of evidence from an accountant’s perspective and to make an independent assessment of the value of the business acquired as at Completion and the impact on that value of the warranty breaches. What strategies do you recommend for companies to effectively prepare for potential W&I disputes before they arise? An effective strategy to prepare for a W&I dispute before one arises is to draw on what factors can influence the outcome of a claim, as noted in the previous answer. In summary, it is important to methodically maintain a record of all key discussions and decisions made during the course of a transaction. It is also important to retain all relevant financial and accounting records and details of the About Nick Andrews Nick has been a partner in the Forensic Accounting market for 25 years, focusing on Disputes. He is a very experienced expert witness, having acted as expert accountant or valuer on over 200 cases. He has given oral testimony on 20 occasions. Nick’s primary specialism is M&A disputes, where he has considerable experience of post-acquisition SPA disputes, including Completion Accounts, Earn-outs and Warranty Claims, including W&I insurance claims. He is one of the UK’s foremost Independent Expert Determiners. Nick has also undertaken over 100 business valuations in contentious situations, including shareholder, joint venture, post-acquisition, High Net Worth Matrimonial and CPO disputes. Contact Nick Andrews Partner, BDO Forensic Accounting Services FCA | MAE | MEWI BDO London - Baker Street Tel: 07788 435618 | 0207 893 3780 Email: Nick.Andrews@bdo.co.uk www.bdo.co.uk
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