What's Behind The Rise In UK M&A Litigation?

• Published date: 17 November 2021
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Litigation, Mediation & Arbitration, Financial Services, M&A/Private Equity, Corporate and Company Law, Trials & Appeals & Compensation
• Law Firm: Bryan Cave Leighton Paisner LLP
• Author: Ms Sarah McAtominey and Andrew Hart

Litigation following mergers and acquisitions has always been a source of important judicial decisions on critical legal issues. However, can it tell us more about the state of the deal market and where future disputes may be heading?

Data from Solomonic shows that there has been a 200% increase in High Court claims issued from 2019 to 2021 that are litigation related to M&A. This trend is sector agnostic, with M&A claims in all sectors increasing over the period.

	2019	2020	2021 (YTD)	Total
Total M&A claims	16	43	48	107
Financial services - including Insurance	1 (6.25%)	12 (27.9%)	12 (25%)	25 (23.36%)
Financial services	1 (6.25%)	10 (23.25%)	10 (20.83%)	21 (19.63%)
Insurance	0	2 (4.65%)	2 (4.16%)	4 (3.74%)
Retail	1 (6.25%)	4 (9.30%)	1 (2.08%)	6 (5.61%)
Energy	1 (6.25%)	5 (11.63%)	2 (4.17%)	8 (7.48%)
Healthcare	1 (6.25%)	0	3 (6.25%)	4 (3.74%)
TMT	3 (18.75%)	6 (13.95%)	7 (14.58%)	16 (14.95%)
Real Estate (including construction)	2 (12.5%)	5 (11.63%)	5 (10.42%)	12 (11.21%)

We think there are a number of possibilities why M&A litigation has grown significantly during this period, and given the deal market over the last few years has been buoyant, this suggests to us that this trend will continue. Those possibilities include:

1. Wider and more mature adoption of warranty and indemnity insurance policies:

• We think that increased adoption of W&I insurance is making claimants more confident to pursue claims when enforcement considerations (which would otherwise be a primary concern) have been effectively de-risked. There is no point pursuing your sellers for damages if they are not ultimately good for it and W&I insurance removes this risk.
• There is a lot of price competition in the W&I market, so insurers are now writing broader warranty coverage, which increases the scope of coverage for buyers when considering claims.
• The existence of a W&I insurance policy can remove some of the emotions and reputational concerns that may otherwise factor into considerations for a buyer looking to sue a seller.

2. A rising trend in claims focused on often overlooked boilerplate provisions. While gateway issues such as whether notices have been served correctly have always been ripe for litigation, we have noticed an increasing trend for litigants to raise issues with other boilerplate provisions like variation, no waiver and assignment clauses.

3. Litigation being used...