A new poll has found that global dealmakers expect M&A disputes to increase during 2024 as a result of pressures including financing challenges, persistently high interest rates and emerging factors including ESG, digital assets and AI.
Berkeley Research Group’s (BRG) M&A Disputes Report 2024 polled 225 private equity professionals, corporate advisors and attorneys across Europe, the Middle east and Africa (EMEA), Asia-Pacific (APAC), North America and Latin America, as well as drawing on insights from BRG’s own experts and qualitative interviews with disputes and corporate lawyers.
The survey found that 65 per cent of dealmakers expected the volume and value of M&A disputes to increase during 2024. 76 per cent of respondents said that growing disputes would be fuelled by geopolitical tensions and macroeconomic concerns.
After a year in which M&A volume and value slumped sharply, close to six in ten respondents (58 per cent) reported that 2023 had seen an increase in disputes compared to 2022. 41 per cent cited inflation concerns as a key driver of disputes, while 31 per cent cited both recession fears and rising interest rates and 29 per cent labelled incorrect or misaligned valuations as a leading factor.
BRG Managing Directorâ¯Mustafa Hadi, the founder of the report, said: “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.”
In 2024, digital assets, such as cryptocurrencies, are expected to be a leading cause of disputes (cited by 47 per cent), followed by energy and climate-related disputes (33 per cent) and ESG-related disputes (28 per cent). Digital assets experienced a highly turbulent 2023 and disruptions are expected to continue during 2024, while there is greater scope for ESG and climate-related disputes amid the shift from oil and gas to renewables.
Overall, respondents expect growing regulatory scrutiny and political investor pressure around ESG during 2024, increasing the possibility of disputes. The poll also found that the EMEA region, which saw the biggest increase in disputes in 2023, is expected to have the highest dispute volume during 2024.
BRG Principal Executive Officer and President Tri MacDonald said that historical concerns around digital assets and “the evolving role of ESG”, which BRG had noted in previous reports, “have turned out to be prescient”.
The report also examined the growing role that AI is playing in M&A. While the rapidly developing technology is seen as potentially delivering numerous benefits for the dealmaking process, in terms of risk mitigation, valuation and speeding up deals, and could play a key role in mitigating some disagreements, it also presents risks that could lead to further disputes.
BRG Managing Director Richard Finkelman commented: “As AI deal uses increase, pushback is rising around issues like model biases, unfair outcomes, lack of transparency and legal risks. 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.”
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