Abstract
Frequently included in mergers and acquisitions (M&A) contracts purchase price adjustment clauses allow for upward or downward adjustments to the purchase price depending on a selected metric to help the parties of a transaction to overcome the information asymmetry about financial variables caused by the time lag between signing and closing. As a complex weave of technical accounting, financial, and legal issues, regardless of how objectively and meticulously conceived and drafted, it is quite often that disruptive issues arise in connection the with these clauses. In addition to the general arbitration clause typically contained in the M&A contracts, as a common practice, parties agree to submit any dispute concerning the values reported in the financial schedules to calculate the amount of an adjustment to an independent accounting firm for an expert determination. Since most of the time contracts do not provide any particular provision as to the relation between these two mechanisms, the practice shows that neither the demarcation of the two from each other nor the interaction between them is always unproblematic. This article, after explaining the price adjustment clauses, discusses the potential problems of which the parties should be well aware and address considering the case law and different approaches.