Up, Up, And...Not Away - English High Court Faults SPA Target In The Aerospace Industry For Inadequate Financial Projections

The English High Court, in Triumph Controls UK Ltd v Primus International Holding Co [2019] EWHC 565 (TCC), has found that proper, accurate financial projections by the sellers would have resulted in a lower purchase price for three companies which manufactured complex metal components for aircraft.

This case highlights the perils, when selling a business, of failing to take care when warranting in relation to forward-looking projections. Here, the sellers failed to properly or accurately take into account key operational and financial assumptions when producing projection models. The result was a reduction of the purchase price.

The judgment provides a comprehensive review of the degree of care the courts will expect from parties in preparing their forecasts in the context of share sale transactions.

Target companies should be alert to the nature and form of disclosure provided as a defence to potential claims following completion.

The facts

The claimants were subsidiaries of a multinational aerospace and defence manufacturer and service provider. They sought damages for breach of warranty under a share purchase...