Expert Determination in M&A Disputes: When a Technical Question Needs a Technical Answer

Expert determination has an important role in M&A disputes, particularly where the disagreement is technical, financial or accounting-led. Completion accounts, working capital adjustments, net debt, cash adjustments, earn-out calculations and valuation disputes often require a specialist answer rather than a full legal adjudication.

From an English law perspective, expert determination is a contractual mechanism. The expert’s authority comes from the parties’ agreement, usually in the share purchase agreement or supporting transaction documents. This makes the expert’s mandate critical. If the clause is clear, expert determination can be fast, focused, confidential and commercially effective. If the clause is unclear, the parties may end up disputing the expert’s role before resolving the real issue.

This article considers when expert determination is useful in M&A disputes, how it differs from arbitration, and why its narrowness is both its strength and its limitation. It also considers Flowgroup plc v Co-operative Energy Ltd [2021] EWHC 344 (Comm), where the Commercial Court dismissed a challenge to an expert determination based on alleged manifest error.

1. Introduction

M&A disputes often begin with a number.

What is the correct working capital figure? What is the net debt position?

Was the completion statement prepared in accordance with the agreed accounting policies?

Has the earn-out target been met? What is the value of the shares or business?

These questions may not require a full legal process. They may require a technical answer from an accountant, valuation expert or financial specialist.

That is where expert determination can be useful.

Properly drafted, it can provide a private, focused and efficient process for resolving technical M&A disputes. It can avoid the cost and formality of litigation or arbitration and allow the parties to move forward without turning every post-completion disagreement into a wider dispute.

However, expert determination should be used carefully. Its strength is also its limitation. An expert is usually appointed to decide a defined technical issue. The expert may not have the procedural machinery to determine legal arguments, manage disclosure, hear witness evidence, or make findings about breach, bad faith, manipulation or dishonesty.

In my view, the key question is not simply whether an SPA should include expert determination. The better question is: what exactly is the expert being asked to decide, and is that question truly suitable for expert determination?

2. What is expert determination?

Expert determination is a contractual process by which parties agree that a specified issue will be determined by an independent expert.

In an M&A transaction, the expert is often an accountant, auditor, valuation specialist, tax expert or industry specialist. Their role is usually not to decide the whole dispute between the parties. Their role is to determine the particular issue referred to them by the contract.

Unlike arbitration, expert determination is not primarily governed by a statutory procedural code. The expert does not have general jurisdiction to decide whatever dispute exists between the parties. The expert can decide only what the parties have agreed to refer.

For that reason, the drafting matters. The clause should explain:

• what issue is being referred;

• who the expert should be;

• how the expert is appointed;

• whether the expert acts as expert and not arbitrator;

• what documents the expert may review;

• whether submissions are permitted;

• whether reasons must be given;

• whether the decision is final and binding; and

• what happens if the dispute includes both technical and legal issues.

These are not merely procedural questions. They determine whether the clause will work when the parties are already in disagreement.

3. Expert determination is not arbitration

Expert determination should not be confused with arbitration.

An arbitrator decides legal rights and liabilities. An arbitral tribunal can determine contractual interpretation, breach, causation, quantum, disclosure issues, expert evidence and factual disputes. Arbitration has a formal legal framework, including the Arbitration Act 1996, now amended by the Arbitration Act 2025.

An expert, by contrast, is usually appointed to answer a specific technical question. The process is narrower and often less formal. There may be no pleadings, disclosure, witness evidence, cross-examination or hearing unless the contract provides for these.

That is not a defect. It is often the reason expert determination is chosen.

If the issue is a pure accounting calculation, the parties may need an accountant rather than a tribunal. If the issue is valuation, they may need a valuation expert applying a contractual methodology.

The difficulty arises when a dispute is presented as technical but is, in substance, wider.

There is a difference between asking:

“What is the correct working capital figure under the agreed accounting principles?”

and asking:

“Did the buyer deliberately manipulate the completion accounts to reduce the purchase price?”

The first question may be suitable for expert determination. The second may require arbitration or litigation.

4. Why expert determination is useful in M&A disputes

Expert determination is useful in M&A because many post-completion disputes are financial or technical. The parties may not need a tribunal to decide liability. They may need a specialist to apply agreed accounting policies, value an asset, calculate working capital or determine whether a financial threshold has been met.

Typical M&A disputes suitable for expert determination include:

• completion accounts disputes;

• working capital adjustments;

• cash and debt adjustments;

• purchase price adjustments;

• earn-out calculations;

• EBITDA calculations;

• valuation disputes;

• accounting methodology disputes; and

• technical tax computations.

The value of expert determination lies in focus. It asks the expert to answer a defined question and prevents the dispute from expanding unnecessarily.

However, parties should not send every post-completion dispute to an expert simply because it has a financial consequence. Many legal disputes have financial consequences. That does not make them accounting disputes.

5. Completion accounts disputes

Completion accounts are the classic M&A context for expert determination.

In many transactions, the final purchase price is adjusted after completion by reference to the target’s financial position at the completion date. The buyer may prepare draft completion accounts. The seller may object. If the parties cannot agree, the disputed items may be referred to an independent accountant.

Disputes may concern:

• cash, debt or working capital;

• provisions and accruals;

• deferred income;

• stock valuation;

• receivables;

• accounting policies;

• historic practice; and

• the contractual hierarchy for preparing the accounts.

These issues often require accounting judgment and may be well suited to an expert accountant.

However, completion accounts disputes can sit at the intersection of accounting and contract interpretation. The accountant may need to apply the SPA. The parties may disagree about what the SPA means. If the clause does not say whether the expert can determine interpretation points, uncertainty may arise.

6. Case study: the boundary problem

A buyer acquires a trading company. The price is subject to a post-completion working capital adjustment.

After completion, the buyer prepares completion accounts showing a significant working capital shortfall. The seller objects, arguing that the buyer has changed the treatment of stock and provisions in a way that is inconsistent with the agreed accounting policies and historic practice.

At this stage, expert determination may be suitable. The issue appears to concern accounting treatment.

But the dispute may develop. The seller may allege that the buyer deliberately adopted an aggressive accounting treatment to reduce the purchase price. The buyer may respond that the seller failed to disclose liabilities. The disagreement may begin to involve disclosure, contractual interpretation, breach, intention, causation and loss.

At that point, expert determination may no longer be enough. The expert may not have the power or procedure to require disclosure, hear witness evidence, decide legal arguments or make findings about conduct.

This is why the clause should explain whether the expert decides only the technical items, whether legal questions are reserved for arbitration or court, and what happens where the issues overlap.

7. Earn-outs and valuation disputes

Earn-outs can bridge a valuation gap between buyer and seller. The seller may believe the business has strong growth potential; the buyer may be unwilling to pay fully for that potential upfront. An earn-out links part of the price to future performance.

Expert determination may be suitable where the issue is purely mathematical or accounting-based:

• Was the revenue target achieved?

• What is the EBITDA figure?

• Were costs allocated in accordance with the agreed formula?

• Was the earn-out calculation prepared consistently with the SPA?

However, many earn-out disputes are about conduct as well as calculation. A seller may allege that the buyer diverted revenue, imposed excessive costs, changed strategy or failed to support the business. Those allegations require legal and factual analysis. They are unlikely to be suitable for expert determination alone.

Valuation disputes are another area where expert determination can be useful, particularly where the contract identifies the valuation basis and methodology. An expert may determine fair market value, enterprise value, equity value, maintainable earnings or normalised EBITDA.

But valuation disputes can also raise legal questions, such as the valuation date, assumptions, exclusions, minority discounts or the effect of one party’s conduct. The expert’s mandate should therefore be clear.

8. Advantages of expert determination

Expert determination remains attractive because it offers real commercial benefits.

It can be faster than arbitration or litigation, especially where the issue is confined to a defined accounting or valuation question.

It allows the parties to appoint a specialist decision-maker with relevant accounting, valuation, tax or sector expertise.

It may be more proportionate than a full adversarial process, particularly where the dispute is narrow.

It is usually private, which is important where the dispute involves sensitive accounts, forecasts, valuation assumptions, management information or business performance.

It can provide finality. Where the determination is final and binding, the parties can obtain closure and move forward.

Its greatest advantage is focus. It keeps the parties on the technical question that needs to be answered.

9. Risks and limitations

The benefits of expert determination should not obscure its limits.

An expert can only decide what the contract permits. If the issue falls outside the mandate, the expert may not have jurisdiction.

The process may not allow wider document review, disclosure, witness evidence, legal submissions or cross-examination. That matters where the dispute turns on internal communications, management decisions, conduct or intention.

Challenge rights are also limited. Where the expert’s determination is final and binding, a disappointed party may have very little scope to reopen it.

Many clauses permit challenge for “manifest error”, but manifest error is not an appeal on the merits. It is not enough that one party disagrees with the expert or believes another conclusion was preferable.

Finally, expert determination does not have the same international enforcement regime as an arbitral award. If a party refuses to comply, enforcement will usually proceed as a contractual claim.

10. Flowgroup plc v Co-operative Energy Ltd

Flowgroup plc v Co-operative Energy Ltd [2021] EWHC 344 (Comm) is a useful case for M&A practitioners because it concerned a completion accounts dispute under an acquisition agreement.

The dispute arose from a working capital adjustment mechanism. Disputed completion accounts matters were referred to an expert. The agreement provided that the expert’s written decision would be final and binding in the absence of manifest error.

The seller challenged the expert’s determination, arguing that the expert had made manifest errors. The Commercial Court dismissed the challenge.

The case is useful for three reasons.

First, it illustrates the respect English courts give to the parties’ contractual bargain. Where commercial parties agree that an expert’s decision will be final and binding, the court will generally hold them to that bargain.

Secondly, it shows that manifest error is narrow. It is not a general appeal route for a party dissatisfied with the result.

Thirdly, it demonstrates the importance of drafting. If parties want a wider ability to challenge the expert’s determination, they need to say so clearly. If they intend the determination to be final except in limited circumstances, that should also be clearly stated.

The practical lesson is that expert determination should be treated seriously. It may be quicker and less formal than arbitration, but it can still produce a final outcome with limited scope for challenge.

11. Defining the expert’s mandate

The expert’s mandate is the heart of the process.

A good clause should define the question the expert must answer. It should avoid sending broad legal disputes to an expert, while also avoiding uncertainty about the expert’s authority.

The clause should address:

• what the expert is determining;

• what is outside the expert’s remit;

• whether the expert can decide incidental interpretation points;

• what information the expert can review;

• what procedure applies;

• whether the determination is final and binding; and

• what happens if the dispute is mixed.

This last point is often the most important. If the dispute involves both a technical accounting question and a legal allegation, the clause should explain how the processes interact.

For example, does the expert decide the accounting issue first? Is arbitration stayed?

Are allegations of breach, manipulation or bad faith excluded from expert determination?

Who decides whether the issue falls within the expert’s mandate?

The purpose is not to overcomplicate the clause. It is to avoid leaving obvious areas of future conflict unresolved.

12. When expert determination should stop

Expert determination should stop where the dispute ceases to be genuinely technical.

It may be appropriate for an expert to decide whether a working capital figure has been calculated correctly. It is much more difficult for an expert to decide whether a party acted dishonestly, breached the SPA, manipulated the business, misled the buyer or caused loss.

In those cases, arbitration or litigation may be more appropriate, with accounting or valuation experts brought into that process.

That distinction matters. Choosing arbitration for a wider dispute does not mean losing technical expertise. It means placing that expertise within a legal process that has the tools to manage the whole dispute.

Expert determination is at its best when the expert is given a clear technical question. It is at its weakest when stretched beyond that role.

13. Conclusion

Expert determination has an important role in M&A disputes. It can provide a fast, focused and specialist answer to technical questions involving completion accounts, working capital, cash, debt, purchase price adjustments, earn-out calculations and valuation.

Its value lies in expertise, proportionality, confidentiality and finality.

However, expert determination is not arbitration. It does not usually provide the same procedural machinery, adjudicative structure or legal safeguards. It is not well suited to disputes involving breach, misrepresentation, fraud, bad faith, factual evidence or complex legal interpretation.

Flowgroup plc v Co-operative Energy Ltd is a useful reminder that where parties agree to final and binding expert determination, the court may give effect to that bargain even where one party is dissatisfied with the outcome. Manifest error is not a general appeal route.

The practical lesson is clear. Expert determination works best where the technical question is properly defined, the expert’s mandate is clear, and the clause explains what happens if the dispute becomes wider.

In M&A transactions, the better question is not: should we include expert determination because the precedent says so?

It is: what technical disputes is this transaction likely to produce, and have we drafted a process that allows those disputes to be determined clearly, fairly and efficiently?

That question should be answered before the SPA is signed.

About the author

Avinder Laroya is an English solicitor, accredited mediator and arbitration practitioner with experience in commercial law, dispute resolution, governance and conflict management. She writes on practical dispute resolution strategy, including mediation, arbitration planning, expert determination pathways and escalation clauses for commercial and cross-border disputes.

Disclaimer

This article is for general information only and does not constitute legal advice. Specific legal advice should be obtained in relation to the facts of any transaction or dispute.

References and resources for further reading

• Flowgroup plc v Co-operative Energy Ltd [2021] EWHC 344 (Comm).

• Lord v Maven Wealth Group Ltd [2021] EWHC 2544 (Comm).

• Persimmon Homes Ltd v Woodford Land Ltd [2011] EWHC 3109 (Ch).

• Arbitration Act 1996.

• Arbitration Act 2025.

• ICC materials on expertise and expert determination.

• CIArb guidance and resources on dispute resolution processes.

• Commentary on completion accounts disputes, earn-outs, purchase price adjustments and manifest error under English law.