Insights | January 23, 2024

Understanding and managing the risks of a corporate transaction

Roschier's M&A and Dispute Resolution teams hosted a forum on the latest developments in M&A disputes. The overarching theme of the event was how to identify and mitigate key transaction risks.

Jouni Salmi, head of Roschier’s Private M&A practice group and co-head of Public M&A, opened the forum by taking the pulse of the current M&A market and predicting developments on the market in 2024. The forum’s keynote speaker Andreas Elving shared insights based on his experiences from various roles, including his current position as CLO at Ahlström-Munksjö.

In the first panel of the day, moderated by Roschier’s Paula Airas, speakers Riitta af Forselles (Vice President Legal, M&A and Corporate, Neste), Krista Koskinen (General Counsel at EDSA), Marcin Sopyllo (Vice President, M&A Legal, Metso Oyj) and Roschier’s Tero Jormanainen discussed the key risks associated with M&A deals from a disputes perspective.

The second panel, moderated by Roschier’s Laila Sivonen and Valentin Golovanov and featuring Alexander Rasmussen (Executive Director and Head of Nordics, Howden M&A), Joel Kättö (Director M&A Legal, Fortum), Kasper Hoielt Xu Olesen (Director, Axcel) and Roschier’s Kiira Tuohimaa-Leisio, provided insights into W&I insurance and how it has changed the M&A disputes landscape.

The concluding remarks at the forum were delivered by Aapo Saarikivi, Head of Dispute Resolution at Roschier. A warm thank you to all our speakers and guests!

Here are some key takeaways from the forum:

Private equity is entering an interesting period as the deal market has cooled somewhat and appears to be in a period of stagnation. However, with many buyout funds – sitting on record levels of investment – facing increasing pressure from investors to return cash, a pick-up in deal activity could be on the horizon.
Understanding what is being acquired is critical to identifying and managing transaction risk on the buyer side. For example, whether the target is public or private will have a profound impact on the risk profile of the deal, as well as whether the driver for the transaction is e.g. IPRs, clientele or market share.
Cultural differences between the buyer and the target constitute a risk which is difficult to manage contractually.
Earnouts and deferred payment mechanisms are currently popular as they help to get the deals done (by narrowing down the valuation gap between the sellers and buyers), even if they increase the risk of dispute.
In international deals in particular, possession is 9/10 of the law. In the event of a dispute, bulletproof contractual terms and success in arbitration help, but may not lead to the desired outcome due to difficulties in enforcing an award. In these scenarios, escrow arrangements or W&I insurance can provide greater certainty.
W&I insurance has become mainstream in the Nordics and it has profoundly changed the dynamics of the deals, often streamlining the negotiation process.
The W&I insurance market works: The cost of insurance is closely aligned with the cost of the risk insured, and there is pressure on the market making the insurers more reluctant to deny claims and more conservative in pursuing subrogation claims.
Despite careful risk management, risks sometimes materialize. Arbitration is rarely the first choice, but it can be an efficient means of resolving a dispute. Preparation for the possibility of arbitration as early as at the deal stage can be a form of insurance in itself.

Our experts are always happy to discuss any questions you may have about M&A, disputes or the combination of the two!

Article written by Associates Roi Rantanen and Andreas Hertzberg