Global M&A Dealmakers Expect Increase in Disputes Amidst Geopolitical Tensions and Economic Uncertainty

In a recent survey conducted by Berkeley Research Group (BRG), it was found that a majority of global M&A dealmakers are expecting an increase in disputes this year. The survey, which is the fifth annual M&A Disputes Report, revealed that 65% of dealmakers and deal lawyers believe that both the volume and value of disputes will go up in the coming year.

The increase in disputes is attributed to various factors such as geopolitical tensions, macroeconomic concerns, and underperforming transactions. Last year, the overall deal value slumped to $2.9 trillion, a 10-year low, as dealmaking slowed down due to economic uncertainties.

According to the survey, more than half of M&A practitioners saw an increase in disputes in 2023 compared to the previous year. Key drivers of disputes include inflation concerns, recession fears, rising interest rates, and incorrect valuations.

Mustafa Hadi, a managing director at BRG, noted that changing deal appetites in a challenging economic environment, heightened regulatory scrutiny, and conflicts over trade and territory are contributing to the likelihood of deal-related disputes.

The survey also highlighted that digital assets like cryptocurrencies are expected to be a leading area of disputes this year, followed by energy and climate disputes and ESG-related disputes. The EMEA region is anticipated to lead dispute volume in the year ahead.

As dealmakers increasingly rely on AI technology for valuations and risk analysis, there is a growing concern about potential disputes arising from flawed AI projections or missed red flags. Richard Finkelman, a managing director at BRG, emphasized the importance of verifying AI tools and focusing on responsible AI practices to mitigate future disputes.

The report, based on a survey of over 200 global M&A practitioners, underscores the challenges and complexities facing dealmakers in the current economic and geopolitical landscape.