Page 75 - M & A Disputes

Language Reflecting Whether the Decision Is Final and Binding

Within the engagement letter executed by the parties, there should be clear language about whether the
award determined by the neutral practitioner is final and binding on the parties. The original transaction
agreement between the parties will usually contain language that establishes the neutral practitioner’s
award as being final and binding. The practitioner’s engagement letter should be consistent with the lan-
guage contained in the original transaction agreement, absent the parties agreeing to amend the agree-
ment and opt for a different process.

Fee and Billing Arrangements

The practitioner’s engagement letter generally sets forth fee and billing arrangements. If specific per-
sonnel can be identified who will be performing services in support of the neutral practitioner, it would
be appropriate to include their hourly billing rates. The timing of the billings, such as monthly, should
likewise be set forth in the engagement letter. Often, the original transaction agreement will contain pro-
visions for the pro rata or proportional splitting of the neutral practitioner’s fees and expenses between
the parties. Fee and billing arrangements in the engagement letter should comport with the specific pro-
visions set forth in the transaction agreement.

An important consideration for the practitioner is to require that all fees and expenses incurred by the
neutral practitioner and their team are paid in full prior to the release of the neutral practitioner’s final
decision. The practitioner should also consider adding a provision requiring the parties to compensate
the neutral practitioner for any time incurred after the decision letter on behalf of one or both of the par-
ties (for example, a neutral practitioner may be asked to testify in a proceeding dealing with some of the
same issues addressed in a working capital dispute that may also be central to a breach of representation
and warranty claim dispute between the parties).

Include the Right to Retain Counsel to the Extent That You Need Guidance on Your Rights or Obliga-
tions Under the Agreement, on Your Scope, or to Address Any Areas That May Be of a Legal Nature and
Outside Your Expertise

To ensure that the neutral practitioner has all the necessary and available professional resources availa-
ble to him or her to render a decision, the engagement letter should contain a provision allowing for the
right by the neutral practitioner to retain counsel to the extent legal guidance is needed on any point that
is outside the particular expertise of the practitioner. Such a provision would normally include a reason-
able notice provision to the party representatives that the neutral practitioner, in their sole discretion, is
seeking legal advice from counsel on matters of a legal nature. The legal counsel retained by the neutral
practitioner will also be required to run a full conflict check.

Arbitration Process

It is rare that acquisition agreements provide detailed guidelines on how to administer the neutral dispute
resolution process. In the context of arbitration, the parties can self-administer the arbitration (essentially
have it directed and run by the neutral practitioner), or it can be administered by a specific neutral insti-
tution, such as the American Arbitration Association, the ICC International Court of Arbitration, or the
CPR Institution for Dispute Resolution. Each institution has its own set of procedural rules that have
been developed to create a more efficient process while achieving a just result. Nonetheless, parties sel-
dom use such institutions to administer the dispute resolution process in merger and acquisition disputes
resolved by accountants; however, some agreements do refer to those entities’ rules to establish the
guidelines or format for the given proceeding. Given that acquisition agreements generally do not pro-

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