Overview

In the latter stages of a business acquisition, there is always a high focus on the legal documentation, not least on the warranties which the buyer requires the seller to give. Warranties serve to underwrite the assumptions on which the buyer has valued the business in question and therefore the price the buyer has offered to acquire it. Considerable time and effort is consequently invested in negotiating these warranties and all the related disclosures and limitation provisions which protect the seller from certain warranty claims.

But what happens when the acquired business turns out to be a disappointment to its new owner? As the decision in Erlson Precision Holdings Ltd v Hampson Industries plc illustrates, claims under warranties given at completion of the deal may not be the only weapon available to buyers in this situation. It may in fact be events much earlier in the sale process that lay sellers open to claims by buyers.

Wragge & Co's corporate team analyse the issues involved and outline the key action points to consider.

Click 'View Briefing' to read on.