LS&HC Horizons 2022 - Flipbook - Page 39
Hogan Lovells | 2022 Life Sciences and Health Care Horizons
39
Transactions
Arbitrating post-M&A disputes in life sciences
Essentially all players in the life sciences sectors are or have been
involved in large-scale M&A transactions. Parties cooperate on
the basis of a range of contractual arrangements, such as R&D
agreements, co-promotion contracts, or joint ventures. They may
engage in the sale/acquisition of product portfolios or individual
products. We have seen both asset and share deals, or a combination
of the two.
Disputes arising from M&A transactions notably arise in connection
with breaches of warranties, or the earn-out. A leading insurer
recently reported a “rising tide of large claims” under policies for
warranty and indemnity insurance. In almost 20% of the deals a claim
was notified. Another frequent scenario are breaches of disclosure
obligations in the pretext of the transaction, particularly where
the seller has failed to disclose information relevant to the target's
performance and/or the purchase price.
Arbitration has become the mechanism of choice for resolving
post-M&A disputes. Sources report that approximately 90% of all
arbitrations are post-M&A arbitrations. In arbitration, parties may
choose a neutral venue, select arbitrators based on their familiarity
with the relevant factual and legal issues, tailor applicable rules and
proceedings to their needs, and agree on complete confidentiality.
Also – unlike court judgements – arbitral awards may be enforced
virtually around the globe under the New York Convention.
These advantages of arbitration are a particular fit for post-M&A
disputes in the life sciences sector. Many global players cooperate
with Asian partners, in which case arbitration may provide the only
enforceable means of dispute resolution. Moreover, post-M&A
disputes in the life sciences sector often involve complex questions
of cGMP, product quality, and the robustness of manufacturing
processes or, in terms of damages, a prognosis of the market
development and/or questions of substitutability. With any of those
issues, it is key to be able to select decision-makers and skilled experts
familiar with the industry.
In our experience, clients in the life sciences sector typically follow a
forward-looking, business-oriented approach, bringing about a certain
reluctance to pursue claims arising from past transactions. Those
claims, however, may be significant. Please let us know if you would
like us to test and assess potential post-M&A claims.
Inken Knief
Partner, Munich
Thomas Pieper
Counsel, Munich
