M&A Disputes Expected to Increase Globally in Challenging Deal Market, BRG's M&A Disputes Report 2024 Finds

Digital assets and energy sectors ranked top dispute areas for 2024

EMERYVILLE, Calif., Feb. 29, 2024 /PRNewswire/ -- Global dealmakers expect more mergers and acquisitions (M&A) disputes in the year ahead as high interest rates, financing challenges and other pressures cast a persistent shadow over the deals landscape, according to Berkeley Research Group's (BRG) M&A Disputes Report 2024, released today. Those conditions are wreaking havoc on business calculations, deepening the risk of disputes over earnouts and other M&A provisions as parties seek to limit risk or recover value from transactions.

Nearly 6 in 10 of M&A practitioners and lawyers surveyed saw more disputes in 2023 than in 2022, and 65% expect both average dispute volume and value to increase in 2024. These results come as regulatory and geopolitical pressures add to dealmaking challenges.

"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," said BRG Managing Director Mustafa Hadi, founder of the annual BRG publication, now in its fifth year. "The report offers important insights into what may be coming in deals and disputes after a year of dealmaker uncertainty and rapid macroeconomic shifts."

BRG's M&A Disputes Report 2024 draws on insights from BRG experts, qualitative interviews with eminent disputes and corporate lawyers and a survey of 225 attorneys, private equity (PE) professionals and corporate finance advisors across Asia-Pacific (APAC); Europe, the Middle East and Africa (EMEA); North America; and Latin America. The report examines how macroeconomic and geopolitical trends are impacting the landscape across different sectors and regions; and includes predictions for how deals and disputes will take shape globally in the year ahead.

2024 Focus: Digital Assets, Energy and AI

Dealmakers predict that digital assets, followed by energy and climate, will be the two leading areas for M&A disputes, consistent with forecasts in BRG's Mid-Year M&A Disputes Report 2023. Digital assets and services—which include cryptocurrency, fintech and artificial intelligence (AI)—endured a turbulent 2023 as major crypto figures pled guilty to criminal charges while Bitcoin's price rose 160%, with more disruptions expected in 2024. Similarly, the shift to renewables is prompting energy-industry market activity as oil and gas producers reorganize their holdings, with increased transactions opening the door for M&A disputes around a host of factors—particularly environmental, social and governance (ESG).

BRG's research also shows that AI is making inroads into the dealmaking process, especially when it comes to valuations and risk mitigation, with PE professionals leading in some respects. AI tools may speed up transactions but present new risks.

"As AI deal uses increase, pushback is rising around issues like model biases, unfair outcomes, lack of transparency and legal risks," BRG Managing Director Richard Finkelman said. "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."

Other key takeaways include:

• EMEA is expected to lead dispute volume in 2024; the region also led when it came to increases in M&A dispute volumes in 2023. Dealmakers cite legal structures across the region as a major cause.
  
  
• ESG-related M&A disputes are on the rise amid a diverse range of challenges, from ESG claims around sale terms and greenwashing to data privacy and employment-related issues like fair pay and equal employment opportunities. Respondents expect regulatory scrutiny and political and investor pressure around ESG to further increase in 2024.

"In the fifth year of our research into M&A disputes, we see the heightened impact of ongoing geopolitical and financial volatility in an increasingly unpredictable world," said BRG Principal Executive Officer and President Tri MacDonald. "Emerging concerns around digital assets like cryptocurrency and the evolving role of ESG, which we noted in previous reports, have turned out to be prescient, demonstrating the importance of our report's multifaceted insights for dealmakers navigating unprecedented macroeconomic terrain."

Download a copy of the BRG M&A Disputes Report 2024.

About BRG
Berkeley Research Group, LLC is a global consulting firm that helps leading organizations advance in three key areas: disputes and investigations, corporate finance, and performance improvement and advisory. Headquartered in California with offices around the world, we are an integrated group of experts, industry leaders, academics, data scientists and professionals working across borders and disciplines. We harness our collective expertise to deliver the inspired insights and practical strategies our clients need to stay ahead of what's next. Visit thinkbrg.com to learn more.

SOURCE Berkeley Research Group, LLC