Deal or no deal: M&A trends and disputes risks for 2025

This positive M&A outlook is fuelled by stabilisation of inflation, lower interest rates, strong capital markets in some jurisdictions and growing positivity around valuations. Private equity players are expected to be key drivers of activity, with a need to deploy capital allocations as well as exit from investments which are reaching (or in many cases have long passed) the end of usual hold periods. For corporate players, appetite for strategic transformational M&A is expected to remain with companies seeking to drive above-market growth by leveraging M&A to overcome structural transitions faster than their competitors in areas such as renewable energy, ESG, digital transformation, and artificial intelligence (AI).

Lifecycle of a deal: where can it all go wrong?

The anticipated growth in deal number and deal value in 2025 will inherently result in an increase in the number of M&A disputes. In 2025, however, disputes risk relating to M&A activity is anticipated to be particularly heightened due to changes in economic and regulatory conditions, challenging market conditions, shifting consumer/shareholder expectations, geopolitical uncertainties, and the twin market disruptors of the energy transition and AI. These elements are likely to be a catalyst that can quickly escalate deal disagreements into disputes. We examine below the key areas in which disputes arise generally throughout the lifecycle of a deal and in particular identify specific risks that we anticipate dominating the disputes landscape in 2025.
 

Ways to mitigate M&A disputes

As a world leading, pre-eminent corporate and disputes resolution powerhouse, we have unrivalled experience in acting on transactions and disputes for private equity firms, funds, listed companies and more. Leveraging this experience, we have sought to collate some key strategies to assist with navigating the complexities of M&A claims that lie in wait for the year ahead.

• For participants in takeover deals, securing shareholder support is more important than ever as a result of increased shareholder activism. Bidders should therefore aim to achieve strong shareholder consensus by obtaining irrevocable commitments from significant investors or acquiring blocks of shares before making a bid.
• Rather than relying only on representations and warranties, buyers should conduct more intense and expansive due diligence, in particular, to identify ESG and AI related risks.
• Comprehensive Warranties and Indemnities (W&I) insurance is now becoming a must-have for sellers who are increasingly required to provide a growing array of warranties and for buyers who do not wish to take counterparty credit risk – but it must not be a substitute for thorough diligence and there may be gaps in coverage which will need to be plugged with other contractual protections.
• Precision must be deployed in drafting key deal terms. Clear valuation methodologies, in purchase price adjustment mechanisms and put/call option clauses can materially mitigate the risk of disputes post-completion. Dispute resolution lawyers should be involved during the negotiation stage to review key documents and provide their perspective on commonly disputed clauses and risk-prone areas. The importance of well-drafted dispute resolution clauses cannot be overstated to avoid difficulties in bringing claims and enforcing decisions. Arbitration is the preferred method of dispute resolution for cross-border M&A deals to mitigate local court risk, ensure confidentiality of proceedings within a neutral forum and be able to easily enforce any decisions.
• Adopt a proactive approach to disputes management which involves being prepared for diverse scenarios and early engagement with the relevant business units.
• Develop a robust litigation or arbitration strategy early including thinking creatively regarding effective strategies to achieve favourable outcomes, such as considering injunctive relief and using the HSF Decision Analysis tool to create a financial model of probable outcomes to assist settlement discussions.  

As we move into 2025, the M&A landscape is likely to be bustling, backed by strategic investments and a recovering economy. However, transactions face troubled waters. The potential for conflict should be meticulously assessed and effectively mitigated to maximise the likelihood of smooth sailing.