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ARTICLE · 06 DECEMBER 2019

Warranting Forward-Looking Projections: Lessons For A Seller

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The High Court has recently considered what "careful preparation" of forward-looking projections entails.

United KingdomCorporate/Commercial Law

The High Court has recently considered what "careful preparation" of forward-looking projections entails. Its decision was in the context of a breach of warranty claim brought by the buyer of three companies under a share purchase agreement.

Facts

The claimants (the Buyers) were part of a multinational aerospace and defence manufacturer and service provider. The defendants (the Sellers) were part of a multinational manufacturer of complex metal components. Under the terms of a share purchase agreement entered into in March 2013, the Buyers acquired the shares in three subsidiaries of the Sellers, one based in the UK and two in Thailand.

The target business was a loss-making business, but future projections indicated that it would become profitable within a few years. This was dependent, in part, on the successful transfer of labour-intensive processes from the UK to Thailand.

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