M&A disputes research results by Accuracy

1. An autopsy of
cross-border
M&A disputes
A research paper
by Accuracy

2. About Accuracy
Accuracy is the sole, truly independent
European actor in the field of financial
advisory services to business leaders and their
shareholders. It is wholly owned by its partners.
Our firm has grown from seven consultants in 2004
to currently 280 professionals in nine countries. We
have offices in Paris, Madrid, Amsterdam, Milan,
Frankfurt, Brussels, London, Munich, Quebec,
Montreal and New Delhi, with a new office opening
in Singapore planned in early 2016. We assist our
clients in dealing with a range of complex,
high-stakes situations including disputes,
acquisitions and companies in difficulty.
Accuracy’s forensic, litigation and arbitration experts
combine technical skills in corporate finance, accounting,
financial modelling, economics and market analysis with many
years of forensic and transaction experience. We participate in
different forms of dispute resolution, including arbitration, litigation
and mediation. We also frequently assist in cases of actual or
suspected fraud.
Our expert teams operate on the following basis:
An in-depth
assessment of
the situation
Clear, robust written
expert reports,
including concise
summaries and
detailed backup
A proven ability
to present and
defend our
conclusions orally
The work is carried out
objectively with the
intention to make it
easier for the arbitrators
to reach a decision
An approach which values a
transparent, detailed and
well-argued presentation of the
economic, financial or accounting
issues at the heart of the case
Our approach provides for a more comprehensive and richer
response to the numerous challenges of a dispute.
02

3. The stages of an
M&A deal and
their stress points
An M&A transaction proceeds through a
number of different stages. Some of the stages
are more likely than others to spark a dispute.
This infographic highlights the danger spots.
Non
binding
offer
Drafting
of the SPA.
Due diligence
period begins
SIGNING
OF THE SPA.
PRELIMINARY
PURCHASE
PRICE SET
Initial
contact
between
buyer and
seller
Closing
conditions
are met.
DEAL
CLOSES
Final
purchase
price
PAID
Completion
accounts
produced.
FINAL
PURCHASE
PRICE
CALCULATED
POST
CLOSING
WARRANTy
/EARN OUT
PERIOD
IB
A
A
L
IB A L
IB A L
A L
A L
IB
= INVESTMENT
BANKER
L
= LAWYER
A
ACCOUNTANT =

4. An autopsy of cross-border M&A disputes
A research paper by Accuracy
After the deal, the dispute
Europe is in the middle of an M&A boom that is sure to be followed by
an uptick in post M&A litigation. But what can dealmakers do to avoid
this and, conversely, what should lawyers look for when considering if a
deal can give rise to an actionable claim? Accuracy explains.
04

5. Lights in London, Paris,
Frankfurt and other financial
centres will burn into the early
hours tonight as lawyers and
accountants draft documents
designed to seamlessly
transfer the ownership of large
businesses across borders from
one company to another. Deal
activity is high, and in some
sectors at an all-time high.
Courts and tribunals across
the continent are also buzzing.
London has a brand new
court complex specially built
for business disputes. But try
getting space in one of its 31
courtrooms. You’ll have difficulty
getting anything before spring.
Commerce and the law are
thriving together.
That’s because mergers
and acquisitions often lead to
disputes. Those disputes have a
long tail and are expensive. New
disputes caused by the 2008
financial crisis are still hitting the
courts, while other unresolved
disputes are reaching their third,
fourth, and even fifth year of
litigation.
At Accuracy we are on the
front line of post-M&A disputes.
As forensic accountants and
valuation specialists we act
as expert witnesses helping courts and
arbitration tribunals understand exactly what
went wrong to cause a dispute. Our duty
is to the court. We aren’t “hired guns.” We
impartially autopsy the deal and present
a report. We then defend our report under
cross-examination from lawyers.
Over the last ten years we have worked on
hundreds of disputes and over that period
we have been collecting data to analyse
trends. We have now built up enough data
to make meaningful findings, and therefore
are in a good position to explain why and
how disputes happen. Overleaf we have
published a paper on the subject. This article
contains highlights. All data have been
anonymised to protect the confidentiality of
the parties.
The first finding is telling; even though
the courts are full to capacity, companies
will do everything possible not to air their
grievances in public. Over the last decade
57% of the disputes we have worked on
weren’t litigated: they were heard in private
settings before arbitration tribunals.
Almost a quarter (23%) were heard
through alternative forms of dispute
resolution such as mediation. Traditional
litigation comes in at just 20%, making it our
clients’ least favourite method of redress.
Expert witnesses don’t tend to be called
in for simple or smaller disputes, so our
research relates to more complex mergers
and acquisitions at the top end of the
market.
The good news for those who think they
might get pulled into disputes is that almost
a third of claims are for the relatively modest
amount of €10 million or less. The bad news
is that 15% of claims are for more than one
billion euros. The biggest dispute we have
dealt with to date was for around €10 billion.
44% of disputes come in at between €10
million and €100 million.
Smaller disputes, however, frequently
do not mean less complexity. In fact, the
relationship between amounts claimed
and complexity is less clear than generally
assumed.
What triggers a dispute? In our experience
the overwhelming majority of disputes take
place because the buyer gets a surprise
after the deal closes. Often this manifests
itself in the form of unforeseen liquidity
needs. Simply speaking, unexpected bills
need to be paid, or expected payments
never materialise.
Much like buying a house, there is often a
gap between the day the deal is agreed and
the day the keys are handed over. In most
circumstances, however, the purchaser of
a house knows exactly what they are going
to pay on the completion day. In the M&A
world this only happens if a fixed purchase
price is agreed. This is called a “locked
box” mechanism. The price is set. It doesn’t
change.
However corporate M&As are more
complex than conveyancing: while a notional
price is agreed when the contracts are
05

6. signed, they are often governed by what
is known as a purchase price adjustment
clause. This means that the final price is set
on the completion day based on conditions
set out in the sale and purchase agreement
(SPA).
These adjustments may mean the
purchaser has to pay more than envisaged
or, after completion, the value of the
ownership interest in the purchased
company comes out at less than expected.
When these surprises can be linked to
breaches of representations and warranties
or other obligations, they may result in a
disputes.
In short: if the purchaser either pays more
than it expected, gets less for its money
or believes that warranties have been
breached, it calls in lawyers or forensic
accountants. Often the lawyers find that
there are grounds for a claim.
The statistics are clear. Locked boxes are
less prone to disputes. At least 80% of the
disputes we have worked on didn’t use a
locked box completion method.
This observation gives rise
to a simple piece of advice:
if all you want is to minimise
the probability of a dispute, all
else being equal, then the use
of a locked box agreement
will achieve that. If you are
a vendor, your purchaser is
much less likely to look for
ways to claw back value
from the purchase price
adjustment.
Another observation which
can be put to use to minimise
the risk of disputes relates to
the role volatility frequently
plays in disputes.
If you acquire a company and want to
avoid a dispute, you should ask yourself
how something unexpected in the target’s
markets could impact the deal.
Then, you should seek to limit the impact
of sharp price movements, and eliminate, as
much as you can, any uncertainty about how
the final purchase price is determined.
The paper overleaf goes into the issue of
volatility in further detail. However, in our
experience volatility is best combatted by a
tightly-drafted SPA that leaves no or minimal
room for debate.
Further, purchasers would
be wise to include forensic,
litigation and arbitration
professionals in the financial
due diligence team and ask
them to identify and address
potential areas of post-deal
disputes before the deal.
A multidisciplinary approach yields many
benefits.
So where are these disputes lurking? On
what part of the balance sheet and in which
paragraphs of the SPA can they be found?
The SPA is a contract that sets out both
parties’ obligations including representations
and warranties and, unless a locked box
is used, how the final purchase price will
be calculated. This means that if there is a
dispute the SPA is the natural battleground.
As the SPA is a contract it is drafted by
lawyers, but many of the obligations it
The statistics
are clear. Locked
boxes are less
prone to disputes.
At least 80% of
the disputes we
have worked on
didn’t use a locked
box completion
method.
06

7. defines relate to financial or accounting
matters.
A typical area of dispute involves the use
of imprecise accounting terms. For example,
we have seen loose M&A terminology in
contracts such as “cash losses” described
as “EBITDA.” Cash and accounting losses
are not the same.
Similar problems creep into SPAs when
the accounting standards which govern the
determination of the final purchase price
are ambiguous, or if there are conflicting
standards which lack a clear hierarchy
(such as consistency with past practice and
generally accepted accounting principles).
On every occasion when this has
happened, the person responsible for
drafting the contract should have worked
with an accountant or a financial expert to
define precisely what they intended to take
place.
From this we can deduce two
lessons. The chances of a dispute
can be reduced if lawyers and
accountants work closely together
on the elements of the SPA that
involve accounting or financial
reporting issues. Conversely, anyone
attempting to build a claim would be
well advised to carefully scrutinise
the elements of the SPA that deal
with these issues. It may well be the
case that the contract actually says
something that the drafter didn’t
intend.
Of course, sometimes the seller
simply tries to rip off the buyer.
Around 10% of the post deal
M&A disputes we work on involve
allegations of fraud that are central
to the claim. By its nature fraud is
hard to detect as fraudsters attempt
to cover their tracks.
Sometimes documents are forged
to make it seem as if the company
has more assets than it really owns
or fewer liabilities. Most often,
important information is simply not
disclosed.
Fraud is also frequently associated
with unnecessary complexity,
intended to conceal, rather than
represent faithfully, the true
financial situation of the company.
Complexity and an unstable
organisational structure are often advance
warnings of fraud.
The research set out on the following
pages goes into all of these issues and more
in greater detail, and the appendix contains
raw data for personal analysis. However,
if dealmakers follow the few simple points
laid out in this article, we believe that the
chances of a post deal dispute will be
substantially reduced.
One thing we can be sure of, though, is
that no matter what the dealmakers do, it is
impossible to guarantee that an agreement
won’t be the subject of a dispute. Large,
cross-border M&As are, by their nature,
complicated and every M&A boom in recent
years has been followed by an uptick in
disputes.
We have no reason to believe that this
M&A boom will be any different.
07

8. An autopsy of cross
border M&A disputes
Few corporate activities waste as much time
and cost as much money as post deal disputes.
They can take years to resolve and cost many
millions of pounds, euros or dollars. They use up a
huge amount of management time and may hinder
a company’s ongoing operations. In short: they
should be avoided.
08

9. We at Accuracy have spent the
last 10 years helping corporates
and private equity sponsors
resolve post deal disputes.
Between us, we have worked on
several hundred litigations and
arbitrations on every continent.
In our opinion, avoiding disputes
should be one of the key
objectives of any transaction.
Avoiding a multi-year dispute is
sometimes down to not getting a
few words in the SPA wrong.
This study uses an analysis of
post M&A disputes to identify
themes and lessons for the
future. We look at why disputes
are avoidable. We explain our
dispute-avoiding toolkit for use
during due diligence. We also
suggest measures to add to
standard pre deal processes
to reduce the risk of post deal
disputes.
Although all disputes are
different, we see the same
themes coming up time and time
again. Typically, disputes occur
when:
Volatility in the target
company’s markets finds its
way into the transaction
There has been ambiguous
drafting in the sale and
purchase agreement
A fraud has taken place
The “thrill of the deal”, or
external pressures to do a deal
on PE sponsors or corporates
This paper will explain these
themes in further detail. We do
not guarantee a rock-solid way
to avoid all post deal disputes,
but if M&A professionals follow
our guidelines, we believe
that there will be a significant
reduction in the number of
disputes, saving everyone
concerned a great deal of time,
money and unnecessary stress.
Conversely, much of what we
say about avoiding disputes can
be used in situations where a
dispute has already occurred.
Our pointers can help legal
teams identify where in the
balance sheet actionable issues
are most likely to be found.
Such information is of use in
the development of claim and
counter-claim strategies.
The Partners, London,
November 2015
The data set
The data are based
on more than 900
individual claims
made over a 10-year
period. The claims
were taken from
reports written by
Accuracy partners
acting as expert
witnesses or
advising claimants
or respondents in
court litigation and
private arbitration
proceedings1
.
Our work as
expert witnesses
mean that we
are bound by
professional
confidentiality.
This report will not
make available any
details of individual
disputes, judgments
or rulings.
The single
largest claim in our
sample was worth
approximately
€10 billion and the
smallest around €5
million. Our sample
includes some of the
largest post M&A
disputes of recent
years.
The disputes
span a wide range
of industries.
They include
manufacturing
companies, large
industrials, IT
firms, real estate,
renewables,
automotive, oil &
gas, music, retail,
infrastructure,
agriculture, aviation,
energy, sports,
and food. We have
looked at disputes
ranging from major
shipyards to leading
European football
clubs. We are
confident that our
data set provides a
useful cross section
of the business
world.
Most of the
disputes in our
report relate to
cross-border deals.2
We have included
disputes from more
than 20 countries,
primarily the UK and
Continental Europe.
Other countries in
the sample include
the US, India, the
UAE, South Korea,
and Japan.
This study
maintains the
confidentiality
governing
engagements in
the strictest way,
while making useful
data available on
an aggregate basis.
Case studies are
on a no-names
neutralised basis.
1 following ICC, LCIA, DIS,
SIAC and other arbitration
rules.
2 The acquisition by a
local subsidiary of a foreign
private equity sponsor is
included in the definition of
“cross border”.
09

10. Here are some factors that can
create volatility:
Irrational exuberance. This
sometimes leads to extreme
price expectations and sharp,
unexpected price decreases
when bubbles burst. This
happened in the real estate
markets in 2008
Disruptive innovation. A good
example of this is music
streaming, an innovation with
consequences that many
people in the industry didn’t
foresee
Panic in financial markets,
such as during the financial
crisis
Lack of visibility of future
profits. This typically relates to
young, high growth industries
or companies. Minor news
can lead to disproportionate
changes in the market’s
perception of the value of the
company
Unforeseen changes in laws or
regulations. A good example is
the recent retroactive change
to feed-in tariffs for renewable
energy in Spain
In finance, volatility is a measure of
variation of price over time. Volatility
can lead to disputes if “real world”
events – for example, sharp movements
in markets or unexpected regulatory
changes – find their way into the
transaction and cause a surprise.
We have seen disputes caused
by each of these factors. One
reason why volatility causes
disputes is that it frequently
affects how the final purchase
price is determined. This means
that on the day a deal closes, if
volatility hasn’t been managed
effectively, the purchaser could
end up paying more, or less,
than their expectation of “value”.
When the parties involved in a
deal have a surprise on closing
day, a dispute is likely to follow
soon.
Here are some reasons
why volatility can have an
unexpected impact on the price
of a company on closing day:
Large swings in sales prices
in an industry impact profit
margins. Unexpected changes
just before closing might
suggest that the company
is worth less than predicted,
thus triggering a dispute.
Volatility affects equity
value via the purchase price
adjustment. For example, a
working capital adjustment
may require the determination
of a “market price” for
inventories in the context of
the lower of cost or market
value test. Significant volatility
in market prices, or in fact
situations around closing
when markets simply do
not function well enough to
establish consistent prices, is
a common source of disputes.
Section 1
When volatility in markets finds
its way into the transaction
Unexpected changes in
bond yields can change the
present value of liabilities
on the balance sheet of a
company. This can lead
to a disagreement over
the valuation of otherwise
comparatively predictable,
long-term liabilities such as
pension obligations.
There is a way to mitigate
the impact of volatility in
transactions: limit how it
affects the determination of
the final purchase price. To do
this, price adjustments should
be thoroughly defined, their
extremes understood and
limited, and in some instances,
fixed values should be agreed.
At the simplest level, you can
agree a fixed purchase price that
doesn’t change on closing day.
Fixed purchase price deals are
known by those in the industry
as “locked box” transactions.
See the box (right) for more
information.
10

11. Purchase price adjustments vs
fixed purchase price (the “Locked Box”)
The ongoing
trading of a target
company between
signing and closing
of an SPA (if both
are not on the
same date) results
in uncertainty as to
the precise balance
sheet position that
will be transferred
on closing of the
deal. There are
two principal ways
to deal with the
uncertainly that
this causes:
A purchase
price adjustment
adjusts the headline
price at closing.
The headline
price agreed for a
business is typically
what is known as
“enterprise value,”
i.e. the gross value
of the operations,
as funded by equity
and debt. This
value is adjusted at
closing to reflect the
level of debt, cash,
working capital
and, sometimes,
other items
measured at that
time. A purchase
price adjustment
thus ensures that
the purchaser
is compensated
for debt (which
is deducted from
enterprise value
to arrive at equity
value) at closing
and that the vendor
receives value for
any surplus cash at
closing (on top of
the enterprise value).
As variations in cash
and debt levels
will vary inversely
with the level of
working capital, an
adjustment for cash
and debt at closing
typically requires
a corresponding
working capital
adjustment. The
SPA sets out the
mechanism, basis
of preparation,
and process to
determine these
adjustments.
The locked
box concept is an
alternative way of
dealing with the
uncertainties of the
balance sheet at
closing. Using this
method, the parties
agree a fixed price
in the SPA with
no subsequent
purchase price
adjustments. This
provides greater
certainty to both
parties when the
deal is signed.
The locked box
concept is based
on a historical
balance sheet date
(the “Effective
Date”), a date
before signing
(typically the date
of the last audited
balance sheet).
The net purchase
price is then fixed
on the basis of
the Effective Date
balance sheet. The
fixed purchase
price reflects
the level of cash,
debt, and working
capital at this date,
after which the box
is “locked” (i.e.
no value should
leak, other than
matters agreed in
the SPA). Locked
box agreements
are therefore
economically,
but not legally,
backdated
transactions.
Profits generated
by the target
between the
effective date and
closing accrue to
the purchaser (as
cash generated
is transferred
to the buyer).
It is common
that the seller
receives interest
as additional
consideration for
the period between
the Effective Date
and closing.
There are also
“hybrid” completion
mechanisms, which
incorporate aspects
of both concepts.
This is the case
either when a fixed
purchase price is
agreed, but there
is nevertheless
a reason or
requirement to
adjust for an item at
closing (for example,
an intercompany
balance), or
alternatively when
a purchase price
adjustment is linked
to a date such as
31 December, when
annual financial
statements are
prepared, but the
actual closing date
differs.
11

12. The only accounting policies
that apply to the completion
accounts are those specified in
the SPA. Our research shows
that missing or ambiguous
definitions of accounting policies
result in a disproportionate
number of disputes.
The good news is that
disputes about the wording of
accounting policies or around
representations and warranties
can be easily eradicated in
many cases if lawyers and
accountants communicate and
cooperate at the intersection of
their disciplines. After all, while
lawyers draft the contract, the
accountants will be the ones
interpreting the wording when
they prepare the completion
accounts on which the final
price is based. Unambiguous
definitions minimise the
opportunity to manipulate the
numbers.
Conversely, in live disputes
litigators should review the
sections on accounting policies
with the help of specialised
accountants. Even if the dispute
doesn’t involve this section, it’s
an exercise that often brings a
new perspective to the dispute.
Frequently, disputes about
accounting policies in the
completion accounts involve a
lack of hierarchy between the
accounting policies used in the
completion accounts.
Sale and purchase agreements, or
SPAs, are contracts drafted by lawyers.
However, they often contain sections
that make reference to technical
accounting or financial reporting
matters, including representations and
warranties, and the accounting policies
that will be used in preparing the
completion accounts to determine the
purchase price adjustment at closing.
It is common practice for the
SPA to specify:
Specific accounting policies
to be used in the completion
accounts
The extent to which the
completion accounts will
be consistent with earlier
accounts
Generally accepted
accounting principles1
When the completion accounts
are prepared, situations can
occur when accounting policies
specified in this list contradict
each other. For example, after
closing, the buyer may uncover
that the historical financials are,
in their view, at least, not GAAP-
compliant. In practice, GAAP is
considered the higher standard
in many of these cases, but this
is by no means always the case.
And if GAAP prevails in cases
of error correction, this typically
results in a “windfall” (to the
benefit of one side).
Windfalls often mean major
surprises which, in turn, lead
to frustration by the party
confronted with a sudden
change in the purchase price, in
particular when an accounting
error is not relevant to the
valuation of the target company.
One party will then receive
more or pay less as a result
of the one-time correction of
an accounting error which has
nothing to do with “value”.
The parties should therefore
be clear on which hierarchy to
use between accounting policies
before signing. They may
decide, for example, to trade the
possibility of a “windfall” against
a greater certainty of purchase
price, even if its determination
at closing were to be non-
compliant with GAAP.
Alternatively, the parties
may decide that GAAP should
prevail no matter what. One
way to look at this is that the
buyer effectively uses generally
accepted accounting principles
as a “last line of defence”
against unknown risks in the
numbers. This can be useful in
situations when access during
the buy-side due diligence was
very limited.
It may also be the case that
changes in GAAP mean GAAP
accounting treatments at closing
are no longer consistent with the
historical treatment.
All these matters can be
comparatively easily resolved in
many cases if the SPA specifies
a hierarchy and if the SPA makes
reference to GAAP at a specific
date.
While this should be routine,
we continue to see disputes
that would not have arisen if
the lawyers and accountants
working on the SPA had
specified an accounting
hierarchy, in particular between
consistency and GAAP.
See case study 1 for an
example of a situation in which
failure to set a hierarchy led to a
multi-million-euro dispute.
The SPA should further clearly
define the term “consistent” as
disputes can otherwise arise
over whether or not a slight
adjustment to an accounting
treatment falls under the
definition. The devil is in the
detail. See case study 4 for a
real-life example.
Even so, what is most
important it that these issues
are resolved before signing,
not afterwards in a post-deal
dispute.
Section 2
When there is ambiguity in the wording
of the sale and purchase agreement
1
Known for short as GAAP; examples of
GAAPs include IFRS, US GAAP, UK GAAP,
or other local accounting standards.
12

13. Our study shows that disputes
over misleading information
often arise from deliberate
inaccuracies in the closing
financial statements, such
as material misstatements
or omissions. As these are
typically used as the basis for
determining both working capital
adjustments and to forecast
future financial performance
of the target, frauds like this
can have a big effect on the
purchase price. For more
information, see case study 3.
Complexity and unstable
organisational structures are
frequent advance warnings of
fraud. Good due diligence cuts
through the complexity.
Often a fraudulent vendor
company will ensure its
accounts are very complicated
and hard to understand. This
complexity is designed to
obscure, rather than represent
faithfully, the financial situation
of the target.
Fraud is deception intended to result
in gain. For example, a seller may try
to deceive a potential purchaser about
the value of a target by manipulating,
falsifying or withholding the data that
the buyer receives. Examples include
improperly recognised revenues and
inflated earnings, overstatement of
assets, manipulation or concealment of
liabilities and incomplete disclosure on
financial statements. These are done
to create a false impression of financial
strength.
The vendor could conceal
obligations that will hit the
purchaser after closing, obscure
future losses or inflate expected
returns.
On the other hand, fraud is
sometimes very straightforward.
In one dispute in our study
relating to the property
development sector, the vendor
overstated the square footage
of some of its sites, leading
to inflated asset valuations. In
another of our cases inventory
records were simply forged.
The purchaser often uncovers
a fraud when it encounters
unexpected cash needs. For
example, a unit of the purchased
company may require an
unexpected cash injection a few
months after closing. And then
another one, and another one.
Cash-flow driven analyses can
therefore be an effective tool to
identify areas of potential fraud
before signing. For example,
they could be used to work out
why large accounting profits
don’t translate into cash, or to
identify situations where three
financial quarters of negative
cash-flow are followed by a
fourth quarter of positive cash-
flows that exceed all losses to
date.
Specific diagnostic tools are
available during the financial
due diligence stage to detect
suspected financial statement
fraud. Their use substantially
increases the probability of
detecting fraud.
Fraud is one of the hardest
dispute areas to avoid as
fraudsters deliberately try to
cover their tracks. However,
considering that, by their nature,
the disputes in our study relate
to frauds that were eventually
uncovered, it is fair to suggest
that they could also have been
uncovered during due diligence.
Section 3
When a fraud is committed
Litigate or arbitrate?
Arbitration is popular.
It allows parties to
settle their disputes
privately, away
from the media
scrutiny that an open
courtroom allows.
Just how popular is it
though? According to
our research, which
uses data that span
10 years, arbitration
is by far the most
popular option.
More than 57%
of the diputes we
have been invloved
in were arbitrated.
What is even more
interesting, though,
is just how unpopular
the open court route
is. Only 20% of the
cases we have dealt
with were litigated
in open court. In
comparison almost
23% of the disputes
were settled by
alternative methods
such as mediation
and other alternative
dispute resolution
methods.
Type of dispute
Other
22.9%
Litigation
20%
Arbitration
57.1%
13

14. Under these pressures, buyers
may brush aside adverse
factors and simply try to get the
deal done. The more time and
resources they have already
invested in the transaction
process, the stronger the
urge will be to brush away
any remaining obstacles –
notwithstanding the fact that the
time and resources are “sunk
costs”.
In organisational behaviour,
this is known as a “commitment
bias”.
In these situations, acquirers
sometimes ignore due diligence
findings, even “red flags”, or
SPA advice because it will
interfere with getting the deal
done. This may be especially
true when they are investing
someone else’s money.
Unfortunately, this happens
more frequently than one might
expect, especially when the
peak of the M&A market is
approaching. In our estimation,
a party has ignored good advice
and ended up regretting it in the
majority of the disputes that we
deal with.
Acquirers may come under significant
pressure to do deals. Private equity
sponsors face expiring funds and
corporates may come under pressure
to spend large amounts of cash that
is earning minimal interest. As a
result, situations can develop in which
multiple buyers chase a limited number
of assets.
Section 4
Pressure to acquire and
the “thrill of the deal”
What is it worth?
Disputes are costly.
But just how costly?
Our research shows
that almost a third
of cases that we
have dealt with
were for relatively
modest amounts,
with nearly 30% of
claims amounting to
€10 million and less.
However, almost
15% of claims were
for over €1 billion.
Deals today. Disputes tomorrow
The current deal-
making environment
resembles both the
internet boom and
the years preceding
the financial crisis,
and in some sectors
there have been
deals that have
matched and even
exceeded pre-crash
highs.
Now, as then,
it is a seller’s
market. Potential
purchasers in some
sectors are actively
looking for deals to
be done.
The consequences
are high valuations,
competitive auction
processes, limited
access to information
by bidders, and
seller-friendly terms
in SPAs.
Those two
historic M&A
booms were
followed by many
post deal disputes.
It is fair to suggest
that this one will
be too. At the most
basic level an
increased number
of transactions will
drive increases
in the number of
disputes. This is
accentuated by an
overall increasing
trend to pursue
disputes.
In addition, we
have noticed an
increase in the
number of earn‑out
deals. Earn‑outs are
a type of deferred
consideration which
means that part of
the purchase price
is paid after closing
and is dependent on
the target meeting
certain financial
targets. An increase
in earn-outs directly
leads to an increase
in disputes as every
payday can trigger a
difference of opinion
between buyer and
seller over how the
payable earn‑out is
determined.
However, there
are some important
differences from
previous M&A
booms this time
around: today’s
buyers have a
preference for
borrowing rather
than issuing equity,
and borrowing rates
are far lower today
than in previous
M&A booms.
There is also a
long-term trend in
Europe towards
so-called locked
box completion
mechanisms that, in
our view, transcends
the short term M&A
cycle, which favours
this seller-friendly
mechanism. As we
have previously
discussed, the
locked box
mechanism is
inherently less
prone to disputes,
which means that
future disputes
are more likely to
arise from areas
independant to the
specific completion
mechanism.
Therefore,
our bottom-line
prediction is that
in the next few
years there will
be an increase
in disputes and
we will see more
disputes relating
to earn-outs and
matters that are
independent of the
specific completion
mechanism used,
such as fraud or
regulatory issues.
FT, Sept 18, Megadeals for
2015 hit record high.
Ecconomist, April 18. A zeal
for deals
0%
5%
10%
15%
20%
29.6%
0-10 10-100
Claim amount (£m)
100-1000 1000+
44.4%
11.1%
14.8%
25%
30%
35%
40%
45%
50% Distribution of claim amounts
14

15. We have examined over 500
individual balance sheet claim
items (with corresponding effects
in the income statement) to
determine which part of financial
statements claims relate to. The
results can be found below.
1
Working capital
Working capital-related
disputes make up the single
largest category of financial
statement-based claims in our
database. Out of 515 claims in
our sample, 273 relate to working
capital.
Working capital is an indication
of the funding required to support
the day-to-day operations of
a company. It is calculated by
adding current operating assets
then deducting current operating
liabilities.
Typical disputes arise over the
accounting for working capital
at closing. Most purchase price
adjustments in our sample
included an adjustment for
working capital. Given the
proximity of working capital to
cash, the adjustment is intended
to ensure that buyers pay for
“value” actually transferred on
closing day. Problems arise when
the value of working capital is
impaired, but the impairment
is not reflected in the books at
closing. This means that working
capital at closing may overstate
the actual value transferred.
Accounting for working capital
requires important estimates
and assumptions about the
recoverability of receivables and
future losses, market prices for
inventories, and types of costs
capitalised into inventories,
among others. Disputes tend to
Which parts of financial statements
give rise to claims more than others?
Which balance sheet positions, and
which part of the profit and loss
account, should purchasers and sellers
be most concerned about when they
want to avoid a dispute?
arise when, after closing, these
estimates or assumptions turn
out to be incorrect.
Trade Debtors and Inventories
Within working capital, the
largest two categories by size are
disputes relating to trade debtors
(71) and stocks (inventories)
(58). These claims frequently
show themselves as breaches of
warranty.
Trade debtor related disputes
typically involve debts recorded
at more than the amount actually
received. This often happens
when the financial difficulties of
a target company’s customers
find their way into the transaction
because the company has been
too optimistic about the amount
of money it is likely to recover
from them. In volatile sectors this
might be a recurring feature.
Claims involving inventory
valuation fall into two categories:
Disagreement over gross
inventory valuation, in
particular technical accounting
questions which arise over
the depth of absorption of
overheads into inventories, and
disagreement over appropriate
market prices in the lower-of-
cost-or-market value test.
Disagreement relating to the
measurement of provisions
against gross inventories, for
example for slow moving items.
This is another area where
volatile sales markets, which
may make it difficult to establish
market prices unambiguously,
find their way into the purchase
price adjustment.
2
Short-term provisions and
accruals
Looking even deeper into
our statistics, 90 of the 273
working capital claims arose
from disputes relating to short-
term provisions and accruals.
For example, this includes
the measurement at closing
of provisions for warranties or
for taxes. These are frequently
accounting items which involve
management judgment.
3
Revenue recognition
Revenue recognition is a
central theme in many post
M&A disputes. Sixty-seven out
of 515 claims relate to revenue
recognition. Many of these are
large and complex claims. The
reason revenue recognition
frequently leads to disputes is
that profitable sales increase
earnings in a period, and earnings
are used as a basis of valuation.
In transactions where the
purchase price is determined as
a multiple of a measurement of
earnings such as EBITDA, the
incentive to overstate earnings
is magnified by the multiplier
applied. For example, if the
enterprise value is eight times
last year’s EBITDA, vendors have
an incentive to look for ways to
increase EBITDA as it will have a
direct, multiplied, effect on price.
Some aspects of revenue
recognition are governed by
particularly “soft” accounting
standards that are vulnerable
to manipulation. For example,
percentage of completion (POC)
revenue recognition under
International Accounting Standard
11, which is used for accounting
for long-term contracts, requires
important estimates.1
Estimating
the degree of completion of a
large project and the remaining
costs to complete, for example,
frequently requires sophisticated
analyses by technical experts.
Their findings are often disputed.
See case study 4 for an example.
Section 5
Statistics: where in the
balance sheet do disputes lie?
1
Revenue recognition standards are
being consolidated under one accounting
standard, IFRS15 – Revenue from
customer contracts, from 1 January 2018
as part of the ongoing harmonisation of
international accounting standards and US
GAAP.
15

16. 4
Off-balance sheet
financing
Seventy out of 515 items
relate to unrecorded liabilities.
Disputes typically arise when
pre-existing liabilities hit the
purchasers unexpectedly after
closing because information was
withheld by the seller either by
accident or intentionally. They
also occur when the parties
disagree on whether a provision
should have been recorded in
the accounts or how it should
have been measured.
We also observe post-closing
disputes arising from allegations
of a breach of representations and
warranties, including for example
in relation to net assets or specific
liabilities.
There is a large variety of hidden
debt items that end up in
disputes, including out-of–the-
money hedges, finance leases,
pensions, contingent liabilities,
and under accruals in relation
to long-term contracts. In one
example in the industrial sector,
the purchaser claimed that project
costs had been understated and
should be increased by over 30%.
5
Fixed asset valuations
Sixty-three out of 515
claims relate to unsupported
fixed asset valuations or
additions. Disputes can arise
when misleading or incomplete
information is supplied during
the valuation exercise. We also
observe disputes between joint
venture parties over the total
construction costs of key assets,
in particular when a foreign
investor has partnered with a
local firm and one company is
therefore closer to the ground
and has greater control over the
choice of EPC contractor etc.
Essentially, most disputed fixed
asset valuations arise either from
an information asymmetry at the
time the valuation is carried out
or from rapid market changes
(e.g. the Spanish real estate
crisis) leading to unexpected
losses for the purchaser.
6
Other items
Forty-two out of 515 items
relate to other issues
that do not come under the
categories above. As this is a
catchall category, the items are
naturally quite diverse, however
there are some trends. One
commonly occurring theme
in transactions that use a
purchase price adjustment is the
taxation impact of the disputed
adjustments. Other items in
this category relate to the
measurement of defined benefit
pension commitments.
16
Section 5 continued...
Disputes by financial statement category
This graphic takes 925 claims that we have worked on and shows
which part of the financial statements they can be found on.
Balance Sheet
Tangible assets 10%
Intangible assets 4%
Financial assets 1%
Trade receivables & other assets 17%
Inventories 11%
Cash & equivalents 2%
Provisions 38%
Trade payables 11%
Other balance sheet items 6%
Income statement
Revenue 24%
Cost of sales 18%
Other operating expenses 38%
Other income 11 %
Net financial expenses 1%
Tax 7%
FINANCIAL STATEMENTS:
TARGETCO INCORPORATED
Other issues (guaranteed breaches,
technical issues) 42 out of a total of 925
Provisions – disputes
are frequently over
accounting items
involving management
judgment.
Revenue recognition
– A central theme
in many post M&A
disputes, especially
large, complex ones
as earnings are
used as a basis of
valuation.
Trade receivables –
Working capital items
often require important
estimates and
assumptions which
may be incorrect and
trigger a dispute

17. Invest time ensuring definitions
of accounting policies and
financial terms in the SPA are
clear. In particular, obtain input
from your financial due diligence
team on the accounting policies
in the SPA which govern
earn‑outs and the completion
accounts. Consider forensic
accountants’ involvement in
particular in the wording of
SPA working capital clauses. If
a dispute is live, consider the
history of the negotiations and
review the accounting definitions
in the context of what the parties
really intended.
Ensure no information is lost at the
intersection of disciplines during a
transaction (the in-house team, external
financial, legal, operating, commercial,
tax and other due diligence advisors).
This means that the different due
diligence teams and the in-house deal
team should communicate constantly
throughout the transaction process, and
the financial due diligence team should
see early drafts of the SPA and be in
a position to understand the basis of
valuation. If a dispute is live, work out
what a “clean” interaction between the
completion mechanism and valuation
would have been. This serves to locate
the problem.
Ask yourself how something
unexpected, either in the
target’s customer or supplier
markets, or in the target’s
financial markets, could
impact the deal. Where could
volatility find its way into the
purchase price adjustment, or
cause a breach of warranty?
Exercise particular care
when these meet “soft”
accounting standards
or vague measurement
concepts. Once you have
identified relevant areas of
risk, ensure the definitions
do not offer discretion and
are not subject to estimates.
In some instances, it may
be appropriate to use fixed
values – for example, pension
obligations, metrics to be
used in inventory valuation,
or expected profit margins
inherent in long-term
contracts. If a dispute is
live, this can be a particularly
difficult area to deal with.
Identify bias in the exercise of
discretion by accountants who
prepared financial information
which may be used to argue
that systematic bias resulted
in extreme outcomes.
Even on the home stretch of
difficult negotiations, be clear
on the financial consequences
of what is really intended, and
whether this is appropriately
reflected in the SPA. Work with
flexible financial models and
use simulation techniques, for
example Monte Carlo or similar
modelling tools, to understand
possible ranges of outcomes
for adjustments and for the final
purchase price. Include “long
tail” events in your analysis to
understand extreme outcomes
and avoid disappointment.
For example, model potential
pay-outs of earn-outs after
closing. If a dispute is live, it
may be appropriate to use the
same analytical tools to review
whether the outcomes which
have led to disappointment
(such as minimal or no earn-
out payments) suggest bias by
whoever prepared the financial
information (for example the
buyer who prepares the earn-
out calculation). An indication
that something is wrong may
be that the outcome, such
as a series of zero earn-
out payments, is extremely
unlikely.
Review the interactions of
different balance sheet items,
which are subject to different
types of purchase price
adjustments to avoid capturing
items twice (double dips) or
not capturing items at all. If a
dispute is live, do the same
thing. There are more double
dips than most people realise.
Many of them go unnoticed.
Include forensic, litigation and
arbitration expertise in the
financial due diligence team.
You should look to the team
for advice beyond a simple
“tick in the box” exercise or
the preparation of a report
to satisfy requirements of
senior lenders. Seek their
advice on how to reduce the
probability of a post deal
dispute. If a dispute occurs,
use specialised forensic
accountants and fraud
examiners to review these
Conclusion:
Hindsight and lessons for
the due diligence process
17

18. Appendix
18

19. Case study 1
Three words missed out
of a contract lead to a
multi-million-euro dispute
Case study 2
A fraudulent non-disclosure
of liabilities leads to a
massive claim
In one recent case in which
Accuracy acted as expert
witness the purchaser claimed
that the target had incorrectly
accounted for a long-term
lease agreement in earlier
accounts. It had classified the
lease as an operating lease
when it should have been
classified as a finance lease1
The purchaser therefore
calculated the effective
lease liability on closing and
included it in net debt. The
seller disagreed and argued
that, even if the lease was
misclassified, the SPA required it
to be classified as an operating
lease to be consistent with the
treatment in the pre-closing
financial statements.
The dispute over whether
consistency or GAAP should
prevail would have been avoided
if the lawyers had inserted
either the phrase “…GAAP shall
prevail” or, alternatively, “…
consistency shall prevail” into
the SPA.
The purchaser’s error correction
brought the lease liability on the
balance sheet and increased
debt. This unforeseen change in
leverage caused a credit ratings
agency to downgrade the
purchaser. The downgrade came
unexpectedly, which increased
the purchaser’s borrowing costs
and led to an actionable claim.
Many fraud cases involve
the non-disclosure of
liabilities. For example, one
of the disputes in our study
concerned the acquisition of
a manufacturing company in
the pharmaceutical sector.
The vendors failed to disclose
a pending litigation, which
stopped the company from
executing a worldwide
licencing agreement. The
damages claimed were the
difference in value between
having a domestic sales model
and having an international
sales model.
19
1
Under International
Accounting Standard 17

20. Appendix
20
This dispute related to the
measurement of a pension
deficit. The target company
sponsored a defined
benefit pension scheme.
The obligation was to be
measured after Closing, using
a methodology “consistent”
with past practice.
Yields of highly rated (AA) bonds
(which are frequently used to
discount pension obligations)
before the deal was signed
are shown in the first graph
opposite. At the time, it was
straightforward to identify an
appropriate discount rate, and
this was the basis of how these
liabilities were measured in the
past.
Case study 4
How significant, abrupt changes
in credit markets led to a dispute
Case study 3
Information lost at the
intersection of disciplines
An SPA included a warranty
over a minimum EBITDA of
£25 million for 2013, the last
financial year before closing.
The target company, which
builds and operates waste
water treatment plants in
emerging markets, overstated
the percentage of completion
(POC) of major ongoing water
plant construction sites.
It also understated the
remaining costs to complete.
Both misstatements combined
resulted in a 25% overstatement
of EBITDA in 2013. Access
by the purchaser during
the due diligence phase
had been restricted and the
overstatements came to light
only after closing, as the target
entity required unforeseen
liquidity. A problem during the
due diligence phase had been a
lack of communication between
the technical and financial due
diligence teams. The technical
experts were therefore unable
to understand the “mechanics”
of how overstated estimates
inflated EBITDA, and the
financial due diligence team
was not able to challenge the
technical estimates on which
POC revenue recognition was
based.
While it was clearly beyond the
competencies of accountants or
financial experts to assess the
technical degree of completion
of a specific waste water
treatment plant, they did not
obtain this expert knowledge
from other work streams. At
the intersection of disciplines,
important information was lost.
Unsupportedfixedasset
additions/f/avaluation
Valuation/Impairment
generalbadallow.
Quantitiesonhand
PoCreceiv.
PoC-rel.payables
Deprec.
Other
Specif.badallow.
Cash/Bankaccounts/
Loans
Other
Overduetradepayables/
accruedexpenses
Pension
Inaccuratecapitalisation
ofcostasintangibleasset
Valuation
Provisions
Overstated/Unsupported
debtorbalances
Unrec.liab.
Costs/Valuat.
Other
Bonus
Tangible
assets
Arbitration 2
37
2
41
0
0
0
10
1
2
14
17
1
0
1
2
3
0
0
3
3
0
0
3
26
1
18
45
0
8
0
8
13
3
1
17
4
1
10
15
4
1
18
23
5
2
26
33
1
1
0
2
16
3
5
24
14
0
1
15
1
0
0
1
9
0
9
18
5
0
0
5
8
1
1
10
4
0
7
11
3
0
0
3
Litigation
Other
Total
Intangible assets
Financial
assets
Trade receivables/
other receivables
Inventories
Cash and
equivalents
Trade payables Provisions
Where in the balance sheet do disputes lie?

21. 21
Bond yields changed, abruptly,
with the arrival of the financial
crisis when yields varied widely
(see second graph below),
mirroring substantial variations
in bond prices. In effect, there
was, for a time, no consistent
market price.
The dispute related to what the
application of a “consistent”
methodology required: while on
the basis of the first graph, no
uplift to yields was applied for
longer terms, did the scattered
yields in the second graph imply
a different slope of the yield
curve? And did a different slope
in the yield curve represent a
change in the methodology
used?
PoC/Lossmaking
projects
Restruct.
Equity
Revenues
Otherexpenses
Other
Warranty/Guarantee
Netdebt:Classification/
recognition
Costofsales
Tax
Def.taxes
Interestincome/expense
Hedging/Foreignex-
change
Tax
Capitallease
PoCRev./Costrecogn.
Legal
Prepaymentsandaccrued
income
G&ACosts
Planningaccuracy
Intercompanyrelations
Otherincome
Guaranteebreach/Differ-
entissues
Techn./environm.issues
1
1
0
2
14
1
0
15
4
0
12
16
13
1
8
22
30
0
5
35
46
4
40
90
1
0
0
1
0
0
1
1
0
0
4
4
0
1
10
11
0
1
5
6
2
1
3
6
59
3
7
69
2
10
9
21
9
14
43
66
17
3
20
40
1
0
2
3
12
0
30
42
76
3
22
101
14
1
11
26
0
2
0
2
0
0
1
1
33
0
0
33
5
0
1
6
Other balance sheet items P&L Other issues
Before the credit crunch bond yields were relatively
predictable. After the credit crunch, they weren’t.
30th November 2008, after the credit crunch
30th June 2007, before the credit crunch
EU - AA bond yield
UK - AA bond yield
US - AA bond yield
EU - AA bond yield
UK - AA bond yield
US - AA bond yield

22. 22
Our forensic, litigation
and arbitration experts

23. 23
Alain DAVID
Vice President
Canada
Since 1990, Alain
has focused his
career entirely on
forensic and investigative accounting
(fraud investigations), litigation support
(commercial disputes), and the
measurement of damages for insurance
purposes (business interruptions, stock
losses and employee dishonesty). He
has analysed financial information from
a broad spectrum of public and private
entities. To that effect, he has carried out
numerous assignments on a national and
international scale.
Alain has been acknowledged as an expert
before the Superior Court of Quebec and the
Federal Court.
+1 514 788 6555
alain.david@accuracy.com
Anthony
THEAU-
LAURENT
Director
UK
Anthony is a director in
Accuracy’s London office. He specialises
in the assessment of complex damages
arising primarily from breaches of
commercial contracts, shareholder
agreements and warranty claims. He has
been appointed as testifying expert for
both Claimants and Respondents in ICC,
ICSID and UK High Court cases, and has
testified before tribunals in matters with
claims amounting to several billion Euros.
Anthony also has comprehensive experience
in assisting clients to acquire and divest
businesses with values ranging from ten
million Euros to five billion Euros.
His work covers a wide range of industries
including media, civil engineering,
manufacturing, automotive, energy, retail,
software and aerospace.
He has advised clients in the United Kingdom,
Continental Europe, the Middle-East, Africa,
North America and Asia.
Anthony holds a Master of Science
in Management from HEC School of
Management. He has dual French and British
nationality and is bilingual.
+44 207 421 8121
anthony.theau-laurent@accuracy.com
Chaitanya
Arora
Partner
India
Chaitanya Arora is a
Partner at Accuracy,
based in New Delhi, India. He leads the
“Forensics, Litigation & Arbitration”
practice of Accuracy in India and South
East Asia. He has worked on matters in
different jurisdictions including Singapore
and India. His experience spans across
several sectors on disputes concerning
joint ventures, termination of contracts
and post-M&A disputes. He is experienced
in cross-examination. Chaitanya also
provides Transaction Advisory Services
and has vast experience in complex
valuation, due diligence and cross border
M&A.
He has experience with projects in
several industries such as retail, industrial
manufacturing, telecom infrastructure,
information technologies, power generation,
agricultural commodities, hospitality,
educational institutions, airport services,
FMCG, real estate, renewable energy,
logistics and distribution.
Chaitanya is a graduate of the University
of Illinois, Urbana-Champaign, USA, and is
a non-practicing member of the American
Institute of Certified Public Accountants,
Certified Public Accountants of Australia
and the Institute of Singapore Chartered
Accountants. He is also a Chartered Financial
Analyst
+91 124 488 7002
chaitanya.arora@accuracy.com
Anne-Marie
BÉLANGER
Vice President
Canada
Ms. Anne-Marie Bélanger
is a Vice -President at
Accuracy Canada. Over the years, she
has executed litigation mandates relating
to damage quantification for breach of
contract, shareholder disputes, conflicts
between franchisors and franchisees,
family litigation, as well as insurance
claims and financial fraud. She also
specializes in business valuations and
has prepared valuation mandates in both
public and private sectors.
She also has prepared and conducted
many presentations on forensic accounting
and damage quantification. In particular,
she taught the course « Gestion des
risques opérationnels (introduction à la
juricomptabilité) » offered by the Faculty of
administration at the Sherbrooke University in
the second cycle of the CGA program in 2012
and 2013.
+1 514 246 4027
anne-marie.belanger@accuracy.com

24. 24
Our forensic, litigation
and arbitration experts
Christophe
SCHMIT
Partner
France
Based in Paris,
Christophe Schmit is
one of Accuracy’s founding partners with
20 years of professional experience. He
leads Accuracy’s Forensics, Litigation
& Arbitration practice and has worked
on engagements in French courts and
international arbitrations. Christophe has
expertise in damages quantification and
analysis of disputes from economic and
financial positions. He has been involved in
cases covering a variety of situations and
industrial sectors. In several cases, he has
given evidence in international arbitrations
and been subject to direct and cross
examinations. He regularly acts as neutral
expert appointed by both parties in M&A
disputes.
Prior to co-founding Accuracy, Christophe
was a partner at Ernst & Young in Paris
(formerly Arthur Andersen), which he joined
in 1993.
+33 1 58 75 75 04
christophe.schmit@accuracy.com
Dr. Ekaterina
LOHWASSER
Director
Germany
Ekaterina joined
Accuracy in 2009,
opening the first German office of
Accuracy in Frankfurt. As a Director she
is responsible for the valuation team in
Germany and manages the Munich office
since 2011. Prior to joining Accuracy, she
worked in advisory and M&A services for
seven years, mainly with PwC Munich. In
this role, she gained extensive experience
in leading large business valuation
engagements.
While at Accuracy, Ekaterina has been
appointed as expert and has worked
alongside the appointed experts to assess
damages and complex valuation issues,
managing valuations, drafting numerous
valuation reports and joint statements of
experts, and taking part in national and
international meetings of experts. She has
also testified as an independent valuation
expert in German court proceedings,
attended international arbitration hearings,
and contributed to examinations and cross-
examinations.
+49 89 66617 7012
ekaterina.lohwasser@accuracy.com
Edmond
RICHARDS
Associate
UK
Edmond is an Associate
in the London office
of Accuracy, Forensics and Litigation
Advisory practice and an Associate of
the Institute of Chartered Accountants
in England & Wales. He has 5 years’
experience in the forensics sector, joining
Accuracy in May 2014.
Edmond has worked on a number of litigation
and arbitration assignments and has assisted
in giving expert advice in loss of profits,
contentious valuation and fraud cases. He
has also advised on transactions, both sell-
side and buy-side. Edmond has a broad
range of sector experience including energy,
real estate, automotive, food processing and
software.
+44 207 421 8133
edmond.richards@accuracy.com
Erik van
DUIJVENVOORDE
Partner
France & UK
Erik van Duijvenvoorde is
a Partner in Accuracy’s
Forensics, Litigation & Arbitration practice
and is based in London and Paris. He has
advised clients on business, economic,
accounting and valuation issues for more
than 25 years and specialises in the expert
assessment and quantification of complex
damages.
Erik has testified as an expert before both
Courts and Arbitration Tribunals covering a
wide range of situations and industry sectors.
His previous experience working for a private
equity fund and the Transactions team
of a Big-Four accounting firm makes him
particularly well placed to act as an expert in
investor, transaction and shareholder-related
disputes.
Erik is a Fellow of the Association of
Chartered Certified Accountants (UK). He
has lived and worked in France and the
UK and has successfully led cross-border
engagements in Europe, the Middle East,
Africa, Asia and North America. His mother
tongue is English and he speaks fluent
French.
+33 1 58 75 75 31
erik.van.duijvenvoorde@accuracy.com
Eduard SAURA
Partner
Spain
Eduard has more than
20 years of professional
experience as a financial
advisor, especially for cross-border
engagements. He has led dozens of
transaction projects in Asia, North and
South America and Northern Africa, in
addition to many countries throughout
Europe. He has also been appointed
independent financial expert in various
international commercial and investment
arbitrations.
Eduard started his career at Schlumberger,
where he was a financial controller of various
divisions and then spent five years in Arthur
Andersen Paris, where he performed audit
and due diligence work both for industrial and
Private Equity firms.
He’s the author of various articles and
lectured several courses on financial risk in
SPA negotiations.
+34 91 406 7301
eduard.saura@accuracy.com

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Giovanni FOTI
Partner
Italy
Giovanni Foti, Partner
at the Milan Office, is
specialized in Fraud
Investigation & Dispute Services. As
Dottore Commercialista, he has performed
valuations and financial analysis, appraisal
and fairness opinion
Before setting up Accuracy Italy, Giovanni
worked as an Executive Director in the Fraud
Investigation & Dispute practice of Ernst &
Young, for the last two years focused on
fraud investigations, litigation, arbitration,
Expert witness, forensic accounting and
compliance risk management.
Prior to joining the Fraud Investigation &
Dispute Services, Giovanni has matured
extensive experience as auditor in Arthur
Andersen and Ernst &Young for the audits of
Companies listed in Italian and Foreign Stock
Exchange (New York, Paris, London).
+39 02 366 962 04
giovanni.foti@accuracy.com
Jean-Baptiste
DE COURCEL
Partner
France
Jean-Baptiste is a
partner at Accuracy in
Paris and has been with the firm since its
inception. He gained audit and consulting
experience from five years with Arthur
Andersen prior to joining Accuracy.
Jean-Baptiste is an expert in arbitration and
litigation support. He has been involved
in numerous disputes before national
courts and arbitration tribunals to assess
damages, provide arguments on the financial,
accounting and economic situations, and
testify as expert.
He has also conducted numerous
engagements in connection with acquisitions
and disposals for investment funds or
companies.
+33 1 58 75 75 12
jean-baptiste.de.courcel@accuracy.com
Hervé DE
TROGOFF
Partner
UK
Hervé is a partner in
the London office and
Head of Accuracy’s Project Advisory and
Disputes practice. Before joining Accuracy
in 2010, Hervé worked as a construction
manager for VINCI on projects in Africa,
ME, South America and Europe, then spent
seven years at Navigant Consulting.
Hervé is an experienced construction
management professional and has been
working for both contractors and consultants
in a number of challenging international
environments. He has given evidence to
adjudicators and arbitrators in English
and French and has been acting as party-
appointed expert in mediations in English,
French and Spanish.
Hervé has a first class honours civil
engineering degree and completed a Masters
of Business Administration at the London
Business School (LBS) where he specialised
in project risk management and project
finance.
+44 207 421 8122
herve.detrogoff@accuracy.com
François FILION
Partner
Canada
François Filion has 20
years of experience in
accounting and finance.
Since 2000, he has specialised in the fields
of investigative and forensic accounting
and business valuation. He has carried
out several mandates related to fraud
investigations, financial irregularities,
valuation of financial losses, litigation
assistance, insurance claims and business
valuation.
François has been acknowledged as an
expert before various courts (more than
30 times), including the Court of Québec
(criminal division), Superior Court, and
Chamber of Financial Security, and has also
testified in a number of insolvency cases.
Francois has also given several presentations
related to his field of practice, and was
an author and trainer for the continuing
education program of the Institute of
Chartered Accountants of Quebec and the
College of Corporate Directors. He is also a
lecturer at Quebec University.
+1 514 788 6551
francois.filion@accuracy.com
Heiko ZIEHMS
Partner
UK / Germany
Heiko is a partner in the
London and Frankfurt
offices of Accuracy. He
has been appointed as expert in multiple
commercial disputes, post-M&A disputes,
and disputes concerning joint ventures.
He has worked on matters in ICC, DIS,
LCIA, and SIAC arbitration forums, ad hoc
arbitrations and German courts. The value
of claims involved has ranged between
a few million to several billion Euros.
He is experienced in giving oral expert
testimony.
Heiko also provides transaction advisory
services and has advised on several hundred
transactions.
He holds an MBA from the Haas School
of Business at UC Berkeley and another
graduate degree in business (Diplom-
Kaufmann) from Otto-Friedrich Universität
Bamberg. A German national, he has lived
and worked in the US, the UK, and Germany.
He qualified and worked as a Certified Public
Accountant. He has published numerous
articles on financial aspects of commercial
disputes, forensic accounting and valuation
matters.
+44 207 421 8124
heiko.ziehms@accuracy.com

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Reiner
SCHUSTER
Director
Germany
Reiner joined Accuracy
in 2014 and is an Director
in the Frankfurt office. He started his
career in 2001 in the Transaction Advisory
Services team of Arthur Andersen in
Eschborn, which later merged with EY.
Reiner has been advising US and European
banks, Corporate clients and PE houses
on complex transactions and restructuring
projects.
He is a Qualified German CPA
(Wirtschaftsprüfer) and tax accountant
(Steuerberater).
+49 69 97788 7313
reiner.schuster@accuracy.com
Leontine
KOENS-BETZ
Managing Partner
Netherlands
Leontine has been
responsible for the set-
up and management of Accuracy’s Dutch
office since its incorporation in 2007.
Prior to joining Accuracy Leontine worked
as an auditor for Arthur Andersen and as
transaction specialist for KPMG Transaction
Services.
Leontine has over 15 years of professional
experience as a financial advisor. She has led
numerous transaction, litigation and valuation
engagements in the Benelux region, as well
as in other European countries.
+31 20 20 66 757
leontine.koens-betz@accuracy.com
Nicolas
BARSALOU
Partner
France
With 25 years of
experience, Nicolas
Barsalou is one of Accuracy’s founding
partners. He was a partner at Ernst &
Young, worked at Arthur Andersen and
started his career as financial controller at
a French corporation.
Nicolas is an experienced damage valuation
expert who has testified in litigation and
international arbitration numerous times
both in English and French. He developed
investigation, analysis and negotiation skills
by dealing with situations involving both
financial and legal matters. He has advised
clients in situations such as commercial and
post-M&A disputes, construction claims and
unfair competition.
+33 1 58 75 75 07
nicolas.barsalou@accuracy.com
Roula
HARFOUCHE
Partner
UK
Roula is a Partner
in the London office
of Accuracy, Forensics, Litigation &
Arbitration practice. She specialises in
contentious valuations and the assessment
of quantum issues in international
arbitration and litigation cases.
She has a broad range of experience valuing
companies, listed and unlisted securities, and
intellectual property rights, and assessing
complex damages in high-value international
arbitration and litigation cases in matters
involving breach of contract, investment
treaty claims, transaction-related disputes,
and intellectual property infringement.
She has been actively involved in nearly
50 contentious cases, and has worked
on matters in LCIA, ICC, SCC and ICSID
arbitration forums and under the UNCITRAL
rules, before the UK High Court, the UK
Family Division, and Patents Court, as well as
in mediation.
Roula is a Fellow of the Institute of Chartered
Accountants in England & Wales and a
member of the Society of Share and Business
Valuers.
+44 207 421 8123
roula.harfouche@accuracy.com
Our forensic, litigation
and arbitration experts
Report edited by James Lumley

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