Global dealmakers expect M&A disputes to increase on economic, geopolitical woes

Berkeley Research Group survey shows that digital assets, energy and ESG will be key disputes areas in 2024

M&A disputes are expected to increase amid weaker economic conditions Shutterstock

A majority of global M&A dealmakers expect disputes to increase this year as military and trade conflicts and economic uncertainty around the world causes recent transactions to underperform, according to a survey from Berkeley Research Group (BRG).

BRG’s fifth annual M&A Disputes Report found that just under two thirds (65%) of dealmakers and deal lawyers believe that average dispute volume and value will go up this year, with 76% of respondents agreeing that geopolitical tensions and macroeconomic concerns will fuel the increase.

Expectations for an uptick in disputes comes after dealmaking slowed significantly last year amid growing anxiety around the economic outlook, with overall deal value slumping to $2.9tr, a 10-year low, according to the London Stock Exchange Group. 

At the same time, BRG’s data shows that more than half of M&A practitioners (58%) saw more disputes in 2023 than the previous year, with 41% citing inflation concerns as a key dispute driver, followed by recession fears and rising interest rates (both 31%) and incorrect or misaligned valuations (29%).

Mustafa Hadi, a managing director at BRG, said: “We’re seeing the increased likelihood of deal-related disputes thanks to a number of compounding factors, from changing deal appetites in a more challenging economic environment and heightened regulatory scrutiny to disruptions from conflicts over trade and territory in key regions around the world.”

The survey highlighted that digital assets such as cryptocurrencies are likely to be a leading area of disputes this year, with 47% of respondents citing it as a primary dispute driver. That was followed by energy and climate disputes (33%) and ESG-related disputes (28%). The EMEA region is also expected to lead dispute volume in the year ahead, as it did in 2023.

Meantime, dealmakers are increasingly using AI to support the M&A process, with more than half of respondents (64%) using AI tech for valuations and 52% using it for risk analysis and mitigation – a potential catalyst for future disputes.

Richard Finkelman, a managing director at BRG, said: “As AI deal uses increase, pushback is rising around issues like model biases, unfair outcomes, lack of transparency and legal risks. Disputes stemming from flawed AI projections or missed red flags are expected to rise. As a result, verification of AI tools and focus on responsible AI practices is increasing.”

The report was based on a survey of more than 200 global M&A practitioners.

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