M&A Litigators See Rise in Post-Closing Disputes - Advice from the 16th Annual Private Equity CFO Conference

PricewaterhouseCoopers, Cooley Godward Kronish and Thomson Reuters recently hosted the 16th Annual Private Equity CFO Conference. During the morning session, Mike Rhodes, Chair of Cooley Godward’s Litigation department, spoke about the macro trends in private equity M&A. He noted that increased financial pressure has caused a greater propensity for disputes between buyers and sellers following the closing of M&A deals, especially on escrow and earn-out consideration. More disputes means bigger problems and a greater time commitment for whomever is appointed the shareholder representative. In addition, Rhodes said that “the courts are applying greater scrutiny than ever to whether the parties have met their fiduciary obligations, including obligations the representative of the former shareholders has to other shareholders”. According to Rhodes, Cooley’s litigation department is “increasingly seeing problems when VCs act as shareholder representative of selling shareholders” and advises that “venture capitalists take on the role of shareholder representative sparingly”.