Post M&A-Litigation

Dual Competence

Our firm looks back on many years of substantial experience in post M&A disputes and disputes arising out of joint venture agreements. In particular, our partners Dr. André Kowalski and Dr. Matthias Schmidt are able to combine comprehensive knowledge in procedural law with profound M&A experience. While analyzing and enforcing your claims, the existing know-how from both areas of law is effectively combined. The history of contractual clauses and custom and practice of the M&A business (also on an international basis) will be taken into account as well as procedural aspects. In contrast to today's practice frequently seen, both partners have a combined competence of litigation and of corporate law and M&A. We are, therefore, in a position to comprehensively review and present the facts of the case. No arguments will be “left on the sidelines”. We can optimally represent your interests and develop and implement the right strategy for you and your company before and during the proceedings.

Disputes can be carried out by us both in German and English.

Expertise

Our expertise over the recent years in post M&A matters includes various industries and proceedings both before the ordinary courts and arbitration panels. Selected examples are: 

  • Representation of the sellers concerning the assertion of guarantee claims under a sale and purchase agreement and other claims related thereto. Proceedings: Arbitration. Parties: International. Value in dispute: EUR 150 million. Industry: Automotive. 
  • Representation of the seller in a dispute between two sellers out of the internal agreement governing the sales process of a company. Proceedings: Arbitration. Parties: German. Value in dispute: approx. EUR 2 million. Industry: Biotechnology.
  • Representation of the party to a license, development and cooperation agreement (as co-counsel with US-American colleagues). Proceedings: Arbitration (New York City, USA). Parties: International. Value in dispute: > EUR 10 million. Industry: Pharmacy.
  • Representation of the seller of a company for claims arising out of a tax clause of the sale and purchase agreement. Proceedings: Ordinary courts. Parties: International. Value in dispute: approx. EUR 1 million. Industry: Paper industry.
  • Defense of claims of an M&A advisor against the seller of a company. Proceedings: Ordinary courts. Parties: German. Value in dispute: < EUR 1 million. Industry: Confidential. 
  • Representation of the buyer for the assertion of guarantee claims with comprehensive processing of foreign legal issues as well as complex technical and scientific matters. Proceedings: Arbitration. Parties: German. Value in dispute: around EUR 9 million. Industry: Confidential. 
  • Representation of a party to preceding arbitration proceedings in case of setting aside the arbitral award by the ordinary courts. Parties: German. Amount in dispute: approximately EUR 9 million. Industry: Confidential.
  • Representation of the buyer for the assertion of guarantee claims with a detailed analysis of various business items and a detailed assessment of and expert’s opinion on the chances and risks. Proceedings: Arbitration. Parties: International. Value in dispute: EUR 25 million. Industry: Automotive.
  • Representation of the seller against an unsuccessful prospective buyer, claiming for a reimbursement of costs. Proceedings: Ordinary courts. Parties: German. Value in dispute: < EUR 1 million. Industry: Furniture.

Preparation and Documentation

While preparing, initiating and carrying out a legal dispute, we automatically become deeply involved in the subject matter. It is our aim to know and to understand all facts of the case. It is our experience that this is the only way to ensure that all arguments will be submitted convincingly, and that objections can be anticipated and properly be rebutted. We turn "every stone upside down" and are not afraid to deal with scientific or technical questions with the support of experts, employees of your company or the forensic departments of chartered accountants. The effort is worth it. This method substantially increases the persuasiveness of our briefs and the effectiveness of our arguments, supported by the combination of know-how from procedural and M&A expertise.

Based on an in-depth analysis of the facts, we will provide you with an unbiased summary of the factual and legal situation and will advise you on a suitable procedure. This will enable you to assess the chances and risks of a dispute also from a commercial point of view. The same applies during the course of such proceedings, e.g. when it might be suitable to enter into a settlement arrangement or if a decision is required whether an appeal shall be filed against a previous decision. The ‘final say’, of course, is with our client. For us, litigation is not an ‘end in itself’. Our aim always is to increase the value of your business.

In the case of board members and managing directors, we often provide the relevant documentation and analysis for a decision to initiate litigious proceedings as well as the conclusion of a settlement. In this context, we may issue a statement that all relevant facts have been properly taken into account, and that the decision is within the limits of the business judgement rule (Sec. 93 para. 1 Stock Corporation Act/AktG). Thereby, litigious proceedings may be well documented and justified within the company and also vis-à-vis shareholders or a supervisory board. This issue recently became more and more relevant with a view to increasing compliance expectations.

Post-M&A Arbitration Proceedings

Arbitration proceedings are often chosen in M&A agreements in order to deal with a better informed and more experienced panel, to carry out smooth, efficient and confidential proceedings and to achieve a decision within a reasonable period of time. Arbitration is also often chosen if the underlying agreement is drafted in English - e.g. in the case of international transactions -, or if the parties belong to different jurisdictions so that one of them may refrain from submitting itself to the jurisdiction of the other. Ordinary courts sometimes lack experience in M&A matters, and that their proceedings may be time consuming, in particular if an appeal will be filed. In ordinary court proceedings, English documents must be translated into German. However, as always in life, arbitration also has its specific disadvantages and risks. Arbitral panels tend to establish procedural rules deviating from the ordinary court proceedings which could have a negative impact on one or even on both parties. This threat is worth to be taken into account particularly as the arbitral award is final and binding, and that it cannot be challenged anywhere simply due to an in correct application of the law. Examples for these risks may be:

  • Risks arising out of conflicts of interest of arbitrators, particularly in case of latent conflicts of interest and business relationships between the organization or firm of the arbitrator and one of the parties or its affiliates.
  • Desire of the arbitral tribunal and/or an arbitral institution accompanying the proceedings to speed up the proceedings extensively, which may be detrimental to the thoroughness and safeguarding of the rights of the parties. This is critical, for example, if a further taking of evidence, briefs or oral hearings would be required, but have been omitted for reasons of procedural economy only.
  • Introduction of common law customs and practices into a German arbitration which have no tradition in ordinary court proceedings here. Examples: Cross-examinations, request for written testimonies of witnesses, application of the IBA Rules on the Taking of Evidence for the taking of evidence or the submission of documents ('Redfern Schedule'), etc. Needless to say that these rules facilitate the handling of the proceedings, but they also shift some essential parts of the work to the parties.
  • Introduction of a "pre-trial discovery", i.e. the obligation of the defendant to submit documents which, according to German procedural law, could not or only under limited conditions be requested by a claimant. Thus, the application of such principles may be to the detriment of the defendant if the claimant otherwise would not be able to make his claim conclusive.
  • Risk of getting assistants or secretaries involved by the arbitral tribunal in order to facilitate its work when such assistants or secretaries may have an influence on the decisions of the arbitral tribunal.
  • Risk of a violation of procedural rights or otherwise illegal decisions in the arbitral tribunal, which are not accessible to the parties because dissenting votes of an arbitrator are usually not provided for in procedural rules of arbitration organizations.

Making reference to procedural rules of arbitral organizations such as the German Institution of Arbitration (DIS) or the International Chamber of Commerce (ICC) discharges the parties from negotiating and drafting such procedural rules individually. The pure reference to the relevant arbitration rules is sufficient. These arbitration rules, however, may be supportive so some of the negative effects set out above. If arbitration is chosen instead of ordinary court proceedings, it may be worth considering to agree upon an individual arbitration agreement instead of referring to standard arbitration rules in order to avoid or at least reduce such risks. We are in a position to incorporate our forensic experience into the negotiation and drafting of such individual arbitration agreements and will give you suitable advice in this respect.

Like decisions of the ordinary courts, arbitral awards are final and binding. There is no appeal against arbitral awards. An arbitral award can only be set aside by the ordinary courts under very limited conditions. We gained substantial expertise in the conduct of such setting-aside proceedings and in the filing of procedural objections (e.g. a violation of the right to be heard, disregard of offers of evidence, missing impartiality and independence of the arbitrators). In the first instance, a Higher Regional Court (Oberlandesgericht) would be competent for such setting-aside proceedings. The decision of such Higher Regional Court may then be challenged by an appeal to the Federal Court of Justice (Bundesgerichtshof - BGH). In proceedings at the Federal Court of Justice, we cooperate with experienced colleagues admitted to this Court, whose assessments will already be taken into account when carrying out the proceedings on the Higher Regional Court level. 

Expert Proceedings

A special case of M&A-related disputes are so-called ‘expert proceedings’ (Schiedsgutachterverfahren). In these proceedings, an expert is commissioned to finally determine the consideration or parts of the consideration on behalf of both parties (Sec. 317 German Civil Code/BGB). Expert proceedings in M&A matters usually occur with respect to the final determination of the purchase price. In these cases, the consideration mainly has to be determined on the basis of certain financial statements as of the relevant balance sheet or closing date.

Technically, these proceedings are not judicial or arbitration proceedings. The determination of the consideration by an expert can be challenged in court or by arbitration. However, a review of the expert’s decision is limited to whether this determination is grossly unfair or based on incorrect assumptions.

When negotiating and drafting rules for an expert procedure, we are able to take into account a vast experience in order to ensure that such proceedings may be carried out smoothly and efficiently, and that objections may be limited if not excluded. In rules for expert proceeding, it should be set out when the proceedings can be initiated, who will be entitled to initiate the proceedings and who has to appoint the expert if the parties are unable to agree upon a proposal. The qualification of the expert must also be determined. It is obvious that any expert has to be remunerated for his services. Therefore, a party could be thwarting the proceedings if it does not properly execute the mandate for the expert accordingly. Thus, an appropriate power of attorney has to be granted to the other party in order to avoid that the proceedings can be blocked already at the very beginning. For the procedure itself, provisions being applicable in case of litigious party proceedings must also apply, e.g. that each party is entitled to submit oral and written statements, that information will be passed simultaneously to all parties, that the expert’s decision shall be reasoned in writing and that his decision shall be made only within the (litigious) range specified by the parties.