OUT-LAW ANALYSIS 3 min. read
AI, ESG and breach of warranties drive increased arbitration in complex M&A deals
31 Mar 2026, 9:46 am
The recent uptick in increased arbitration of M&A-related disputes looks set to continue, following a year marked by a surge in major deals and geopolitical tension that will continue to cast a shadow over the sector.
Over the last 12 months, deal volumes and values rose, especially in the category of multi-billion dollar “mega” deals, as companies pursue ambitious, transformative transactions across the technology and media sectors, to name just two. The AI boom continues to resonate, driving demand for data centre infrastructure and sparking deals in the energy space.
With the increased scale and sophistication of these deals comes increased risk exposure and regulatory pressure, contributing to a continued shift towards arbitration as a popular option for resolving M&A-related challenges.
Against a backdrop of market volatility – driven by continuing geopolitical tensions, including the effects of global tariffs and shifts in US policy direction – as well as heightened regulatory scrutiny, M&A disputes have increasingly found arbitration to offer a confidential, neutral and widely enforceable mechanism for resolution, albeit with some notable territorial nuances.
What to look out for
There are several significant factors which will likely play an increasingly significant role in triggering disputes in M&A transactions in the near future.
A prominent factor in 2026 will be the integration of AI into day-to-day practices at companies, which increases the risk of disputes, particularly at the pre-signing stage of a transaction. Fears over AI ‘hallucinations’ during due diligence, together with the risk of mishandling sensitive or confidential data, heighten regulatory exposure, potentially triggering fines and penalties that could impact deal valuations.
Similarly, as environmental, social and governance (ESG) requirements become more demanding due to ramped-up regulation, friction around deal valuations may crystallise as disputes, particularly where regulatory scrutiny unearths shortcomings in ESG compliance. In that context, greenwashing allegations that target warranties and indemnities in the share purchase agreement (SPA) have become frequent flashpoints, often pushing parties towards arbitration.
In practice, alleged breaches of warranty often serve as the catalyst through which parties attempt to revisit the economic foundations of their deal. During the post-merger integration stage – and once the target’s financial and operational realities become fully visible to the buyer – tensions can arise where the buyer considers that disclosures were misleading or that the value of the business was overstated. Perceived breaches of warranties are particularly sensitive where there is an element of deferred consideration or earn-out provisions at play, and which a buyer might view as an opportunity to ‘correct’ the valuation.
For parties navigating a newly merged business, airing out such grievances in a public forum carries with it reputational risks, and can otherwise expose commercially sensitive information at a delicate stage of the merger. The discreetness of the arbitral process has obvious value here, allowing parties to avoid unnecessary public scrutiny at a time where a degree of confidentiality is plainly warranted.
The dynamics of breach of warranty and valuation disputes sit alongside a broader set of pressures currently shaping cross-border transactions. The geopolitical impact of ongoing conflicts has manifested as a ramping up of sanctions and export controls. High-value, cross-border M&A deals are especially exposed to the resulting compliance pressures, reinforcing arbitration as a preferred solution – particularly given the availability of emergency and expedited options when speed is critical.
Conflicts are also increasing disruption at an operational and supply chain level for firms, which can in turn trigger material adverse change clauses or force majeure events. Again, the ability to opt for emergency arbitration can help parties resolve their issues quickly and potentially preserve deal timetables.
At the contractual level, pre- and post-signing disputes have risen as the issues noted above come to light and tighter regulatory environments increase transparency, exposing weaknesses in deal structures and accounting practices.
What does this mean for you?
Those involved in M&A deals in 2026 and beyond should be looking to ensure that clear, precise conditions are set within SPAs and related documents to mitigate foreseeable risks – particularly in the relatively novel areas of AI and ESG.
Parties to M&A deals would also be well advised to keep sanctions and regulation specialists engaged throughout the deal lifecycle to identify and mitigate emerging issues before they escalate into disputes. If issues do arise, the proactive use of mediation or other ADR mechanisms can help save time and costs before differences become irreconcilable.
When all else fails, it is vital to have in place dispute resolution architecture that reflects the nature of the deal and the parties to it. Carefully drafted dispute resolution clauses go a long way in preventing avoidable, satellite litigation issues over applicable law or forum ambiguity, and provide much-needed certainty in times of conflict – be they at a deal or global level.
Co-written by Melissa McLaren and Zaid Abu Dhab of Pinsent Masons.
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