Resolving a dispute relating to undisclosed liabilities after the acquisition of a company

Our client acquired a new business last year under a purchase agreement, paying over £1,000,000 to the seller. Shortly after the purchase was completed, our client discovered anomalies in the accounts of the acquired business.

After a forensic accounting investigation was carried out, our client identified that certain liabilities had not been properly recorded in the accounts of the business it had acquired. This resulted in an unexpected and undisclosed liability, and also potential reputational damage to our client.

We were instructed to advise our client as to its position, and their ability to pursue claims against the sellers of the business for the losses arising from the liability. We provided clear and confident advice on our client’s right to withhold payment of deferred consideration payments due to the sellers. We also advised on the basis upon which claims could be framed and presented under the business sale agreement. We drafted, prepared and served the requisite notices to commence claims against the sellers.

We delivered a strong case for our client and this resulted in a swift negotiation and a commercial settlement being achieved to resolve the financial disagreement, and also address our client’s wider commercial concerns about the issues it had identified from its investigation