M&A Dispute Volumes Are Rising in Climate of Economic Uncertainty and Geopolitical Upheaval and Are Set to Increase Further in 2023
Mergers and acquisitions disputes accelerated in 2022 even as deal activity slowed, with the darkening economic outlook expected to fuel further disagreements over deals in the coming year. The latest survey found that macroeconomic concerns are surpassing COVID-19 disruptions as primary dispute catalysts, a trend that dealmakers, lawyers, and private equity executives expect to extend into 2023.
Key takeaways from this year’s report include:
- The dispute pace likely will pick up in the coming year amid continued market volatility due to concerns over inflation and a possible recession, as well as geopolitical uncertainty and lingering effects of COVID-19.
- Financial Technology (including cryptocurrency), Energy & Climate, and Traditional Financial Services are the top-ranked sectors for increased dispute activity in 2022. Respondents expect the Construction & Real Estate sector to take the lead in 2023.
- Environmental, social, and governance (ESG) disputes are brewing as regulations take shape and businesses strive to meet evolving, multifaceted ESG criteria.
- EMEA is the region expected to drive dispute activity in the coming year, with strict regulatory regimes and political strife seen as significant disruptive factors.
The report examines how rising concerns around the volatility of markets and political upheaval are influencing M&A deals and dispute behavior. BRG’s research found that the dramatic events of the past year—including the energy crisis in Europe and elsewhere, falling stock prices, and real-estate market disruptions—have shifted the sectors experiencing the most disputes compared to 2021, when COVID-19’s effects heavily impacted hospitality, life sciences, and technology. The report also tracks steps that lawyers and advisors are recommending to reduce the likelihood of disputes, such as a greater emphasis on conducting enhanced due diligence while deemphasizing material adverse change and material adverse effect clauses for sellers.