Why do merger and acquisition transactions end up in litigation?

On Behalf of | Aug 17, 2022 | Business Law |

Merger and acquisition transactions are legally complex. Disputes among the parties involved can open a legal can of worms, and what’s more, they can occur at any stage of the process, even after everything has been finalized.

As a buyer or seller in such a transaction, it is crucial to anticipate and avoid these problems beforehand. Doing so may help you avoid the costly financial and legal consequences of a legal showdown. Below are some common sources of misunderstanding in a merger and acquisition deal.

Disclosing confidential information

Violating pre-contractual obligations such as non-disclosures can brew conflict. Mergers and acquisitions deals involve gaining access to the innermost details of a business or company, financial or otherwise. When such information is leaked to third parties, it can be a potential source of dispute.

Incomplete or inaccurate disclosures

Issues can arise when the seller does not provide factual documentation about the business that affects the deal. This may include information regarding tax liabilities, pending lawsuits or regulatory investigations.

Improper language in the documents

Loosely worded or ambiguous clauses in the sale and purchase agreement can be confusing and lead to contention. Fallouts may be inevitable if the agreement is improperly drafted. For example, if you have provisions that create a legal relationship between the buyer and seller after closing the deal, it is crucial to make everything clear to all the parties.

Protecting your interests during a merger and acquisition

The thrill of buying or selling your company may cloud your judgment, and if you are not careful, you will be left counting your losses. Since you cannot leave anything to chance in such once-in-a-lifetime transactions, you should seek informed guidance before you begin the process.

It could determine whether you will get a raw deal or not while protecting you from future legal liabilities.