Post-M&A litigation: contractual interpretation after closing

“The greater the difficulty, the greater the glory in overcoming it.” This reflection, attributed to Epicurus, although rooted in a different philosophical context, serves—if approached with due caution—to introduce an idea that resonates in the legal sphere: complex scenarios tend to generate broader scope for disputes and, consequently, for interpretation.

In the Spanish mergers and acquisitions (M&A) market, there has been a noticeable increase in disputes arising after the closing of transactions. This trend may be linked to the progressive sophistication of share purchase agreements, which have evolved into highly technical instruments.

Such contracts incorporate a wide range of mechanisms—price adjustment provisions, covenants, earn-out structures, conditions precedent, security arrangements such as escrows or bank guarantees, among others—whose interaction does not always lend itself to straightforward interpretation. Each additional layer introduces potential areas of friction in defining the parties’ respective rights and obligations.

This is compounded by a competitive environment in which, at times, the timeframe for pre-transaction review is compressed. In such circumstances, the contract assumes an enhanced role as a risk allocation tool, leading to an increase in both the scope of representations and warranties and the remedies available in the event of breach. This heightened contractual density may contribute to the emergence of disagreements once the transaction has been completed.

In uncertain economic environments, the assumptions underpinning a transaction may prove less robust. Where the performance of the acquired business falls short of initial expectations, it is not uncommon for parties to revisit the contract in search of grounds to initiate claims.

In this context, disputes often arise in relation to the scope of representations and warranties, the existence of undisclosed liabilities, or the interpretation of indeterminate legal concepts embedded in the agreement, such as “materiality,” “best estimate,” or the occurrence of a “material adverse change.” At their core, these disputes revolve around contractual interpretation and the proper allocation of risk between the parties.

The scenarios described above are reflected in recent rulings of the Spanish Supreme Court, which address issues directly related to the interpretation of contractual provisions in transactions of this nature.

The judgment of 22 December 2025 (STS 22-12-2025) concerns a dispute arising from an investment agreement between an industrial company and a private equity fund, specifically regarding the exercise of a call option over shares. The parties agreed that a breach of the shareholders’ agreement had occurred due to an increase in board remuneration. However, they disagreed on the legal consequences of such breach—namely, whether it could be remedied or whether it triggered the automatic termination of the option. The Supreme Court adopted a literal interpretation of the contract, ruling in favor of the fund.

Similarly, the judgment of 14 January 2026 (STS 14-1-2026) addresses the interpretation of a non-compete clause included in a share purchase agreement relating to several textile companies. The clause defined its scope by reference to certain clients within a specified timeframe. The Supreme Court opted for a restrictive interpretation, holding that the limitation applied only to those clients who simultaneously met the conditions set out in the clause. The decision was grounded in the literal wording of the provision.

These rulings can be understood within a broader context in which post-closing disputes are becoming increasingly prominent in M&A practice. This does not necessarily point to a dysfunctional market, but rather to a higher degree of transactional sophistication and a more active approach to contractual risk management.

In this environment, the technical quality of the contract and the anticipation of potential sources of dispute become critical. Practice suggests the value of involving legal teams with expertise in both transactional structuring and dispute resolution, given that contractual interpretation may ultimately prove decisive in the outcome of such conflicts.

On this basis, at ILIA ETL GLOBAL we provide legal advice on transactions involving the acquisition and sale of companies, as well as on due diligence processes and the corporate structuring that typically accompanies such transactions, including capital increases and, where applicable, restructuring or dissolution scenarios.