Post-M&A Disputes Planning for Economic Uncertainty at EisnerAmper

The present global economic climate is a puzzle marked by unpredictability, geopolitical turmoil, and the consequences of widespread tariffs, resulting in a shifting landscape for mergers and acquisitions (M&A). Companies and financial buyers worldwide have seen a slowdown in deal-making activities. Despite the promise of a stronger market at the start of 2025 due to economic resilience, improved financing conditions, and private equity’s desire for investment monetization, current data presents a more cautious outlook.

Recent figures from Dealogic reveal that M&A deal volume dropped to just over 2,300 transactions in April 2025, the lowest monthly total in two decades. The US, the world’s leading dealmaking market, saw only 555 deals in that month, the lowest since 2009. This 34% decline from the monthly average of 3,500 deals indicates a reluctance among buyers due to concerns about tariffs, disrupted supply chains, increased operating costs, credit challenges, and uncertainties in projections.

Despite the slowdown, deals are still closing, albeit at a reduced rate. However, history indicates that such periods often lead to heightened post-transaction dispute activities. Following a deal’s completion, transaction parties frequently seek to renegotiate the purchase price by adjusting balance sheet/net working capital and EBITDA/earn-out metrics for a potential “second bite at the apple.”

Purchase price adjustments and earnout provisions play a significant role in M&A transactions by delaying the final determination of total consideration until after the deal closes or for years in the case of earnouts. These elements are commonly disputed as they can cause discrepancies between the agreed-upon purchase price and the actual metrics at closing. Purchase price adjustments align the closing balance sheet with the initial valuation, while earnouts provide sellers with additional payment based on post-transaction performance metrics.

Statistics from SRS Acquiom reveal that over 90% of deals contain purchase price adjustment provisions, with working capital being the primary metric in 85% of cases. Additionally, between 20-30% of non-life sciences transactions include earnout provisions, with over two-thirds spanning multiple periods.

To mitigate the uncertainty surrounding post-transaction disputes, parties are urged to take proactive steps. Engaging with post-transaction dispute experts early on can help identify inconsistencies in key closing provisions, minimizing future ambiguities. In light of prevailing market conditions, such as tariffs and trade disruptions, it is crucial to integrate flexibility into contracts to address unforeseen risks that could impact valuations and calculations post-deal closure. Reviewing Material Adverse Effect and Material Adverse Change provisions in agreements is also advised to provide additional safeguards for deal participants given the current economic fluctuations.