Takeover disputes

What we do

An acquisition is a dynamic and multifaceted process. An acquisition process begins with discussions between the parties involved to exchange ideas and identify various interests. The negotiation process consists of several phases, during which mutual commitment gradually strengthens. The negotiation process involves various common interim agreements, such as a confidentiality agreement, a letter of intent, and an outline agreement. Our team of M&A specialists has extensive experience at the negotiating table.

During the acquisition process, various conflicts may arise regarding, for example, the seller's duty of disclosure, the buyer's duty of due diligence, the termination of negotiations, or the future role of individuals or bodies of both companies. One way to resolve such an acquisition dispute is through arbitration proceedings.

Arbitration is a private alternative to normal (government) adjudication by judges. One of the advantages of arbitration is that a dispute can be settled quickly and accessibly. Parties voluntarily agree that the final recommendation of the arbitrator(s) is binding on both parties. The number of arbitrators must be odd, usually one or three. If three arbitrators are chosen, both parties select one arbitrator themselves, and the third arbitrator is chosen by mutual agreement. If one arbitrator is chosen, the assignment is based on mutual agreement. Arbitration is an excellent way to quickly resolve conflicts behind closed doors. As an alternative to arbitration, mediation can also be chosen.

We have the knowledge and expertise to assume various roles during an arbitration case: from arbitrator to advisor. We have an experienced team of lawyers and legal experts in the field of M&A transactions and arbitration. Contact us to discuss the possibilities.

Types of takeover disputes

Acquisition disputes often arise only after closing, when it becomes apparent that the acquired company does not meet expectations. Practice reveals a number of recurring conflicts:

• Breach of warranties. In the purchase agreement (the share purchase agreement or asset and liability transaction), the seller warrants certain facts, for example, that the financial statements present a true and fair view or that there are no pending legal proceedings. If this proves to be incorrect, it constitutes a breach of a warranty.
• Indemnities. For known or foreseeable risks – such as an ongoing tax investigation or an environmental issue – parties include an indemnity. Disputes then concern the scope, the notification period, and the amount of damages.
• Balance sheet guarantee and purchase price adjustment. Discussions regarding the closing balance sheet, working capital, or net debt position often lead to a purchase price adjustment.
• Earn-out conflicts. If part of the purchase price is made conditional on future results, disputes frequently arise regarding the calculation and whether the buyer has actively frustrated the earn-out.
• Broken-off negotiations. Anyone who breaks off negotiations at an advanced stage may, under certain circumstances, be liable for the other party's damages.

Whether you are an international group selling a subsidiary or the baker on the corner transferring his business to a successor, the legal core is the same. We assemble a mixed team of lawyers and in-house counsel tailored to the size and complexity of your dispute.

Legal basis in a takeover dispute

A takeover dispute almost always revolves around the question of who bears which risk and whether the correct information has been provided. The most important legal grounds are:

• Breach of contract (Article 6:74 of the Dutch Civil Code): if a guarantee or contractual obligation is breached, the injured party may claim performance, dissolution, or damages.
• Error (Article 6:228 of the Dutch Civil Code): if a party has entered into the agreement based on a false representation of facts, for example because the seller breached his duty of disclosure, the agreement may be annulled or modified.
• Fraud (Article 3:44 of the Dutch Civil Code): if intentionally incorrect or incomplete information has been provided to induce the other party to enter into the purchase, the agreement is voidable. The threshold for assuming fraud is high.
• Non-conformity (Article 7:17 of the Dutch Civil Code): in an asset-liability transaction, the delivered business or asset may not conform to what the buyer was entitled to expect.

Central to this is always the interplay between the seller's duty of disclosure and the buyer's duty of investigation (due diligence). In case law, the seller's duty of disclosure generally outweighs the buyer's duty of investigation. Our legal experts assess which legal basis has the best chance of success in your situation.

Why arbitration in takeover disputes?

Acquisition contracts often contain an arbitration clause, in which parties agree to submit their disputes not to a state court, but to an arbitrator. Arbitration significant advantages for acquisition disputes:

• Confidentiality. An acquisition often contains competitively sensitive information. Unlike before a state court, an arbitration case can be handled entirely behind closed doors, without a public judgment.
• Expert arbitrators. Parties can arbitrators with specific knowledge of M&A, accountancy, or the relevant sector. This is a major advantage in complex balance sheet and earn-out discussions.
• Speed ​​and flexibility. The procedure can be tailored, which generally leads to a faster resolution than going to court.

As a lighter option, binding advice can also be chosen , for example, to have only a purchase price dispute settled by an independent expert.

Our approach

We combine litigation experience with in-depth knowledge of M&A transactions. First, we map out the agreement and the facts: which guarantees and indemnities have been provided, which time limits and threshold amounts apply, and which legal basis offers the best prospects? Next, together with you, we choose the most effective route: a settlement at the negotiating table, a binding opinion, arbitration proceedings, or, if necessary, recourse to the courts. By deploying a mixed team of lawyers and in-house counsel, we keep costs proportionate to the importance of the case.

Frequently asked questions about takeover disputes

What is the difference between a warranty and an indemnity?

A warranty relates to unknown risks: the seller guarantees that certain facts are correct. An indemnity relates to known or foreseeable risks, for which the parties agree in advance that the seller will bear the damage if the risk materializes.

Can I reverse an acquisition if it turns out that the seller withheld information?

This is possible under certain circumstances. If the seller breached their duty to disclose, you can challenge the agreement on the grounds of error (Article 6:228 of the Dutch Civil Code) or, in the case of intent, fraud (Article 3:44 of the Dutch Civil Code). However, compensation or an adjustment of the purchase price is often a more appropriate course of action than full annulment.

Is my takeover dispute suitable for arbitration?

If your purchase agreement contains an arbitration clause, arbitration is generally the appropriate route. Even without a clause, parties can still agree to arbitration. We would be happy to assess whether arbitration, binding advice, or a state court is the best fit for your situation.