December 13, 2010 / 5:04 PM / 8 years ago

UK slowdown brings sixfold rise in M&A court cases

* Sluggish UK economy exposes overvaluations

* Legal disputes on the up as accounts scrutinised

By Nia Williams

LONDON, Dec 13 (Reuters) - High Court disputes over soured merger and acquisition deals leapt more than sixfold last year as weaknesses in the UK economy exposed business frailties and overvaluations, legal data firm Sweet & Maxwell said on Monday.

Both buyers, who felt cheated by meagre inventories and over-inflated profits, and sellers who had not received the full amount agreed in deferred payments, contributed to the surge.

In 2009 there were 270 claims in the Chancery Division of London’s High Court, Britain’s top court for civil cases, compared with 42 in 2008.

“Even in a buoyant economy, M&A can involve huge financial and operational risks. The chances of large losses are magnified when the economy’s tide turns, exposing overly optimistic views of a company’s value,” Sweet & Maxwell said in a statement.

Many M&A disputes are settled out of court to contain costs, meaning the 2009 figures represent only the hardest-fought battles, the firm said.

Recent courtroom wrangles include a dispute between units of Australian bank Macquarie (MQG.AX) and commodities trader Glencore [GLEN.UL].

Macquarie International Investments Ltd had agreed to buy a stake in energy supplier Corona Energy Holding from sellers including Glencore UK Ltd, but a dispute broke out over financial data in Corona’s accounts, Sweet & Maxwell said.

“If a buyer has to write off tens, or hundreds, of millions from a merger that has gone wrong, they are going to feel aggrieved,” Geraldine Elliott, a partner at law firm Reynolds Porter Chamberlain LLP, said in the statement.

“Sometimes they sue because it is a way of diverting attention from the failed execution of a deal.”

Editing by David Hulmes

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