One prevalent characteristic of post-M&A (mergers and acquisitions) arbitrations is asymmetrical access to information. After completing the transaction, the buyer typically acquires full and unrestricted access to the target’s records, while the seller loses it.

This situation can create problems, especially in earn-out disputes, where the seller challenges the calculations presented by the buyer but cannot substantiate its position due to the lack of access to source documents. Similar issues may arise when, e.g., the buyer alleges that the financial statements provided before the transaction were fraudulent, or when the parties disagree on the interpretation of the SPA, and the seller who negotiated the SPA using an e-mail address of the target company, no longer has access to that e-mail account.

Various strategies can be employed to address these or similar issues:
➡️ First, parties frequently append a digital copy of the virtual data room to the transaction bible, ensuring that at least some essential materials are available to everyone in case of a dispute.

➡️ Second, parties may contractually agree on the seller’s right, usually limited in time, to request certain information and documents regarding the target company post-transaction. It is important to precisely define the scope of such rights to prevent potential abuse and unnecessary disputes arising from vague and general descriptions.

➡️ Third, to the extent that the seller can demonstrate the necessity of certain documents to defend its rights or pursue its claims in arbitration, the arbitral tribunal can order the buyer to provide during the document production phase. Front-loading the document production phase is not uncommon in M&A disputes to establish an equal playing field for both parties. Alternatively, the parties may agree, or the tribunal may order, that one party (e.g., a seller and former president of the target company) be granted temporary access to their former mailbox under the supervision of the buyer. This approach allows the individuals directly involved in the negotiations to efficiently identify the e-mails that they remember were sent or received, ensuring a quick and accurate search. It is often more cost-effective than document production based on general search terms or other criteria.

However, the asymmetry of information will also operate in the opposite direction. While SPAs often provide for relatively short periods in which the buyer can bring post-transaction claims, the buyer’s knowledge of the target company during that time window is significantly worse than that of the seller.

Accordingly, both sides should carefully consider their positions and think about the mechanisms securing their timely access to relevant information.

by Wojciech Sadowski

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