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Best practices to avoid post-merger disputes

March 5, 2018 Article 1 min read
Authors:
Joanne Baginski Matt Petrucci
Successful deals should be a time to celebrate. But post-merger disputes are becoming the new norm for M&A activity. With the inherent complexities of ownership change, don’t let these five areas cause undue turmoil. Read more at PE Hub.

Focus is on a hand on a boardroom table with the other meeting attendees blurred in the background.Whether you’re buying or selling a company, post-transaction should be a time for celebration about getting the deal done and excitement about the future. But many deals quickly devolve into disputes over the finer points, from purchase-price adjustments and working-capital disputes to whether negotiated earnout metrics are attained.

Post-merger disputes have become an endemic problem. According to SRS Acquiom research, in 2016, 39 percent of deals included a separate escrow specifically for post-closing purchase-price adjustments. The average agreement holds back 10% of the deal value in a general escrow account and some can hold back 15% or more. Deals valued at $50 million or less tend to withhold larger escrow percentages, making it particularly important for middle-market companies to follow best practices during negotiations in order to minimize disputes.

With M&A activity expected to gather even more steam in 2018, buyers and sellers should pay particular attention to five areas that can generate the most trouble after the deal is done.

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