Reducing litigation risk in purchase price adjustments Abstract

Reducing litigation risk in purchase price adjustments

Abstract:

Purchase Price adjustment mechanisms continue to be the cause of many disputes between buyers and sellers. Starting from a conceptual explanation about accounting and purchase price, which, according to the author, are the source of such disputes, and considering the various risks of manipulation and mistakes in the most common adjustment parameters, the article provides the reader with best practices on how to reduce financial risk in SPA contracts. In particular, the article emphasizes how due diligence conclusions, clear and unambiguous definitions, and interpretation hierarchies are paramount in drafting price adjustment clauses.

Keywords: Price adjustment, litigation, dispute, due diligence, M&A, SPA, hierarchy, debt, working capital, WCR