Q&A: The rising tide of M&A disputes

June 2026  |  SPECIAL REPORT: INTERNATIONAL DISPUTE RESOLUTION

Financier Worldwide Magazine

June 2026 Issue

FW discusses the rising tide of M&A disputes with Haley Stern at Kirkland & Ellis, Julie M. Beskin at McDermott Will & Schulte and Jessica R. Kunz at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates.

FW: Given the increasing complexity of deal structures, volatile market conditions and heightened regulatory scrutiny, what overarching trends are you seeing in how M&A disputes arise and are being resolved today?

Stern: The throughline across today’s M&A disputes is a mismatch between transaction complexity and drafting precision. As deal structures have grown more sophisticated, the contractual framework and relevant case law governing it have not always kept pace. That gap is where many disputes arise. A few trends stand out. First, rather than fighting over whether a deal closes, we are seeing more disputes over how value is calculated, allocated and preserved. Second, heightened regulatory scrutiny has extended closing timelines and introduced additional disputes around parties’ obligations during longer interim periods. Third, the rapid evolution and adoption of artificial intelligence (AI) have added additional complexity to nearly all phases of the M&A lifecycle.

Beskin: As private M&A activity continues to rebound in 2026, deal-related litigation is on the rise. Post-closing financial and operational performance, earnouts and diligence-related issues continue to be a primary driver of disputes in 2026. Developing and uncertain geopolitical events, including US interventions in Venezuela and Iran, the Russia-Ukraine conflict and tension with China, are increasing deal complexity and introduce new risks to be allocated between buyers and sellers. In addition, the use of AI-generated information in the course of diligence or data governance raises several novel questions that courts are grappling with.

Kunz: We have seen a number of trends across public and private company M&A disputes in recent years. The first trend is the continuing rise in earnout litigation. As market volatility has increased and other macroeconomic factors have depressed earnings multiples, earnouts have increasingly become an available pathway to bridge the valuation gap. The corollary is an increased frequency of post-closing disagreements when the earnout metrics are not satisfied. The second trend is an increase in private negotiation of termination and reverse termination fees for transactions that have become undesirable due to changed circumstances between signing and closing. Although we have seen some termination fee litigation, those disputes are more often resolved in private negotiation between the parties.

FW: How are you seeing earnout structures evolve in response to market volatility? What types of performance metric disputes are becoming common?

Beskin: Earnouts are evolving toward tighter, more engineered definitions designed to manage volatility – often with shorter measurement windows, multiple tranches and metrics tied to recurring revenue, retention or other ‘quality of revenue’ concepts. But the more tailored the metric, the more disputes migrate from ‘is anything owed?’ to ‘what exactly counts?’ Common disputes include classification and recognition issues such as recurring versus non-recurring, gross versus net, churn, credits and offsets, post-closing policy or methodology changes that affect the calculation, and disagreements about whether disputes must be decided by an accountant within a defined submission process rather than litigated in court.

Kunz: From a litigation perspective, the earnout structures featured in the case law are a lagging indicator. The recent earnout decisions from the Delaware Court of Chancery – the leading court with expertise in this space – tend to be post-trial opinions arising from deals that closed years earlier. The cases tend to be highly fact-intensive, and the earnout provisions at issue are often industry and party specific. Nevertheless, on the M&A side, we are seeing increased focus on the duration of the earnout period, the financial metrics used to determine whether the earnout has been met and the guardrails around each parties’ rights and obligations to support and manage the business post-closing. The Delaware courts have also awarded equitable relief, including reinstatement of senior management and an extension of the earnout period, where the buyer was found to have improperly interfered with the target’s ability to achieve the earnout.

Stern: While earnouts remain an indispensable tool to bridge value gaps in the current environment, we are seeing parties increasingly negotiate both shorter earnout periods and earnouts conditioned on multiple earnout metrics. And with parties agreeing to multiple earnout metrics, it is perhaps unsurprising that we are frequently seeing disputes over how those metrics are defined and applied. Earnouts have also become particularly important in AI-driven deals. These deals face several unique and evolving challenges, including the pace of development and uncertainty around AI pricing, which have made it difficult to conduct due diligence and appropriately value AI assets with confidence.

FW: In what areas are SPA breach and warranty claims most frequently arising today, such as disclosure standards, data room completeness or the use of carve outs?

Stern: Disclosure standards remain a persistent battleground for representation and warranty claims. Disputes often turn on whether a seller’s disclosure was detailed enough to meet the relevant disclosure standard, or whether a document included among hundreds of files in a virtual data room fairly disclosed a known risk. There is also some scepticism about overinclusive disclosure schedules that fail to adequately identify material issues. Cyber security, data privacy and AI representations are a fast-growing category for representations and warranties disputes. This is especially true as the regulatory landscape for these claims continues to evolve and where post-closing incidents expose pre-closing weaknesses.

Kunz: On the litigation side, we commonly see breach claims arise in the context of pre-closing conduct and post-closing indemnities. Particularly in deals where there is an extended post-signing-pre-closing period for regulatory review, the seller may be subject to varying degrees of restraint in operating the business. Disagreements are more common in the face of rapidly changing market conditions, and the buyer’s and seller’s respective rights to control the course of conduct pre-closing are subject to the specific language in the share purchase agreement, which may have been negotiated months or years earlier under very different market conditions. Post-closing, where there is a cap on post-closing indemnities, parties often look to fraud carve outs and the detailed information in the disclosure schedules to maintain claims that would otherwise be subject to the contractual cap on recovery. Anti-reliance provisions and contractual materiality standards, which may be tied to a particular person or persons’ knowledge, are also front-and-centre in these disputes.

Beskin: Breach and warranty claims frequently arise from ‘information edges’ – whether a fact was required to be scheduled, disclosed with enough specificity, disclosed in the way the contract required and actually carved out by the negotiated qualifiers. Dura Medic Holdings, Inc. Consolidated Litigation illustrates how data room disputes can become record-intensive questions about what was present, what was findable and whether it was communicated as an exception to a representation. James Travis Laster, vice chancellor of the Delaware Court of Chancery, credited evidence that parties internally treated “it’s in the data room” as a reason not to highlight an issue; the court then found the issue was not disclosed before closing.

FW: In current conditions, how are courts and arbitral tribunals assessing material adverse change (MAC) arguments? What trends are you seeing in attempts to terminate deals on MAC grounds?

Kunz: Material adverse change (MAC) litigation has risen and fallen in recent years. During the pandemic, we saw a dramatic rise in MAC cases because, at that time, many MAC clauses did not specifically contemplate the possibility of a global pandemic. MAC clauses tend to be industry and party specific, but it remains the case that there are very few deals successfully terminated on MAC grounds.

Beskin: In Delaware, it remains very difficult for a buyer to prevail on a MAC, as the party seeking to excuse its performance under a MAC clause bears the burden of proof. Although parties could contractually allocate the burden of proof otherwise, this is rare. In Tyson Foods, the court found that “a short-term hiccup in earnings should not suffice; rather the material adverse effect (MAE) should be material when viewed from the longer-term perspective of a reasonable acquirer”. Because a buyer is presumed to be purchasing the target with a long-term view, declining results must be expected to persist significantly into the future, over a period measured in years, not months.

Stern: Echoing what we saw during the pandemic, the current environment has reignited discussion about invoking MAE provisions. The reality is that successfully triggering an MAE remains difficult. Courts across key jurisdictions rejected many MAE arguments during the pandemic, holding that an MAE must be significant in magnitude and durationally significant. Additionally, sellers negotiated considerably broader carve outs following the pandemic. As a result, despite the disruption caused by recent tariff policies and emerging geopolitical conflicts, we are seeing relatively few attempts to terminate on MAE grounds. Instead, parties are more focused on negotiating tailored interim operating covenants and targeted closing conditions that directly address current risks, which are more likely to be successfully triggered.

FW: To what extent are post-closing adjustment mechanisms generating litigation? What contractual drafting pitfalls are surfacing repeatedly?

Beskin: Post-closing purchase price adjustments generate disputes because they combine negotiated economics with accounting judgments, and they often ‘go live’ when leverage and incentives are at their sharpest. Disputes commonly arise from reclassifications, methodology shifts and disagreements about the baseline and target, especially where historic financials were imperfect. Repeated drafting pitfalls include definitional ambiguity, including the interaction between generally accepted accounting principles concepts and any consistency requirements, as well schedules that do not map cleanly onto definitions. Drafters of share purchase agreements (SPAs) should be more thoughtful than ever in drafting choice of law and forum clauses with respect to post-closing adjustment mechanisms.

Stern: Post-closing adjustment mechanisms remain a major driver of post-closing litigation. How parties structure the dispute resolution framework for those adjustments is where we are seeing repeated issues. The emerging practice among sophisticated parties is to resist a ‘one size fits all’ approach and instead negotiate a tiered dispute resolution framework that explicitly assigns different categories of disputes to different mechanisms. For example, accounting questions might go to an expert determination, pure contract interpretation to arbitration and fraud claims to the courts. But executing that framework is harder than it sounds. It demands precise language and clear definitions, especially for claims that could fall into more than one category. When those categories are left with ambiguities, a dispute that was intended to be streamlined can quickly become subject to multiple decision makers, adding time and expense that the parties were trying to avoid.

Kunz: Post-closing adjustment disputes arise with greater frequency than we see in public litigation forums. Depending on the nature of the acquirer and the target company, these disputes are often resolved through private dispute resolution mechanisms, whether by a mediator, arbitrator or neutral accounting expert. Parties’ right to an appeal or review by a court of such decisions can be meaningfully limited by contract. Although post-closing adjustment provisions are heavily negotiated and accompanied by illustrative financial statements, there are issues that can be difficult to predict and time consuming to resolve, particularly in the context of tax-related matters and cross-border transactions. It is not uncommon to see disputes in multiple jurisdictions that are relatively small individually but material on an aggregate basis. Particularly for privately held companies, there has been litigation around the use of historical accounting practices versus generally accepted accounting principles-compliant accounting for the adjustment dispute, reinforcing the need for careful and clear drafting in the transaction agreements.

FW: Are you observing an increase in fraud or misrepresentation allegations related to data governance, AI-generated information or diligence gaps? How are tribunals treating these claims?

Kunz: As a practical matter, this is the next major litigation frontier, but there have not yet been any significant cases addressing the use of AI in transaction diligence. As more mid to large US companies use AI for diligence-related functions, these issues will filter up to the courts. To this point, courts and legal ethics committees have cautioned practitioners generally about the use of AI without adequate safeguards. But the technology continues to improve, and it is inevitable that we will see litigation around the use of AI in M&A sooner rather than later. Very recently, there have been a series of judicial opinions indicating that the use of AI can waive the attorney-client privilege, and it will be interesting to see how, if at all, that case law evolves in the coming years.

Stern: The proliferation of AI use by public companies has fuelled a surge in AI-related securities class actions, which show no signs of slowing down. One of the emerging categories of these claims involves what regulators have termed ‘AI washing’. This is where a company misrepresents or overstates its AI capabilities, the scope of its systems or the role AI actually plays in its products. The US Securities and Exchange Commission moved first, bringing high-profile enforcement actions. Private plaintiffs followed quickly, filing claims under sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5. The case law is still developing, but early decisions signal where it is headed. AI disclosures should accurately describe how systems are deployed, reflect their true scope and candidly address limitations and risks. Practically speaking, AI-related statements demand the same rigour as any other material disclosure.

Beskin: Fights over the authenticity of AI ‘deepfakes’ will increasingly appear in deal disputes. The Judicial Conference Advisory Committee on Evidence Rules met on 7 May 2026, and the agenda included a working draft amendment to rule 901 that would create a two‑step structure. First, the challenger must first present evidence sufficient to support a finding of AI fabrication to warrant an inquiry. And second, if that showing is made, the proponent must then meet a preponderance standard for admission. With respect to fraud claims, buyers and sellers should understand the importance of specific ‘anti-reliance’ clauses, and the limits of a standard merger clause or a clause limiting the buyer’s remedies to indemnification.

FW: With regulatory approvals becoming slower and more complex, how are parties structuring long stop dates, termination rights and damages provisions to mitigate the risk of delay driven disputes?

Stern: As regulatory approval timelines have grown longer and less predictable, parties are responding with tailored contract provisions designed to allocate delay risk with greater precision. On outside date structure, automatic extensions triggered by the absence of regulatory clearances have become standard in transactions with meaningful regulatory exposure. Relatedly, extension periods have lengthened materially in M&A agreements due to delays caused by multijurisdictional or heightened antitrust review. Damages provisions have also evolved in this context. Regulatory-specific reverse termination fees are now common where approval is genuinely uncertain, and fee levels have increased as a percentage of transaction value to reflect the risk borne by sellers when the outcome is outside their control.

Beskin: Parties are allocating regulatory timing risk with more tailored outside dates, extension mechanics and termination pathways tied to specific regimes. They are also incorporating automatic extensions tied to regulator delay, with specifications on who controls an extension and what cooperation is required during the extended period. The recent Delaware Chancery case, Desktop Metal, Inc. v. Nano Dimension Ltd, illustrates that when an SPA contains explicit ‘efforts’ covenants and a strong structure with negotiated carve outs, parties may litigate performance – drafting history, response times, negotiation stances and whether the buyer’s objections actually fit within the carve out – rather than treating ‘we don’t have the approval yet’ as the end of the analysis.

Kunz: Interestingly, the complexity of modern M&A agreements has tended to weigh against the use of AI tools to facilitate those negotiations. Many industries, like the energy sector, have been managing complex regulatory approval requirements for years, and the application of those general principles may carry over to new sectors, but the tools are similar. The parties can always agree to extend the termination date, but third-party conditions, like the drop-dead date on third-party financing, are a common area of concern in litigation where there is an extended delay to closing.

FW: How do you foresee the nature of M&A disputes changing over the months and years ahead? What new areas of contention do you expect to emerge?

Beskin: We expect M&A disputes to become more technical and data-heavy, with increasing emphasis on key performance indicator (KPI) reproducibility, post-closing control over systems and reporting, and contract-defined processes that accelerate resolution, such as expert determination, tight notice and objection mechanics, and interim relief. AI-related disclosure and governance issues will give rise to disputes, such as where a buyer challenges the reliability of AI-assisted diligence materials, including the level of human intervention underlying reported performance.

Kunz: In addition to the impact of AI, we will continue to see private and public disputes over earnout provisions and post-closing purchase price adjustments in mid- to large-cap M&A deals. For large public company M&A, one area that is increasingly ripe for litigation is the introduction of a topping bid, which we have seen in a series of high-profile cases in recent years. We will also see the continued evolution of stockholder litigation related to public company M&A, which has been subject to recent legislation in Delaware, among other states, the long-term impact of which remains uncertain.

Stern: AI-related claims will continue to dominate the discussion in the years ahead. As more deals are premised on a seller’s AI capabilities, we expect post-closing disputes over whether those capabilities were accurately represented and valued. Data privacy and protection is another emerging category of contention. As data privacy and security laws continue to develop globally, parties and their lawyers should stay on top of the evolving legal framework. Finally, geopolitical risk is another area to watch. Extended regulatory review and continually shifting trade policies will remain an ongoing challenge in M&A.

Haley Stern is a litigation partner in the New York office of Kirkland & Ellis LLP. She focuses her practice on corporate and complex commercial litigation in the Delaware Court of Chancery, as well as other state and federal courts. She also advises companies and their directors and officers on transactional and corporate governance matters. She can be contacted on +1 (212) 390 4162 or by email: haley.stern@kirkland.com.

Julie M. Beskin is a member of the special situations group and real estate litigation group. A corporate and commercial litigator, she has extensive experience with disputes arising in the context of M&A, corporate governance, alternative entities, shareholder and the federal securities laws. She also has extensive experience litigating in the Delaware Court of Chancery, including disputes related to limited partnerships and limited liability companies. She can be contacted on +1 (212) 756 2218 or by email: jbeskin@mcdermottlaw.com.

Jessica Kunz advises on transactional matters involving corporations and alternative entities, issues of corporate governance and control, fiduciary obligations of directors and officers, and federal securities laws. She also regularly counsels clients engaged in intellectual property-related litigation in Delaware courts. She can be contacted on +1 (302) 651 3139 or by email: jessica.kunz@skadden.com.

© Financier Worldwide

THE PANELLISTS

Haley Stern

Kirkland & Ellis

Julia M. Beskin

McDermott Will & Schulte

Jessica R. Kunz

Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

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Q&A: The rising tide of M&A disputes