Transatlantic deal-making: how disclosure mechanisms shape M&A strategy in the US and Europe

Transatlantic deal-making: how disclosure mechanisms shape M&A strategy in the US and Europe

Private equity and M&A dealmakers in 2025 are navigating a landscape shaped by geopolitical tensions and uncertainty. Both sellers and buyers will look for legal protection when approaching transactions. In transatlantic deals, however, differing market practices in the US and Europe can introduce additional layers of complexity that parties need to take into account.

Disclosure mechanisms: a tale of two systems

A key feature of transatlantic M&A transactions is the difference in how buyers and sellers approach representations and warranties and disclosures. Disclosure mechanisms are contractual tools used to allocate risk between the parties. They allow the seller to provide information that might otherwise breach representations and warranties made in the purchase agreement, helping ensure that both sides enter the transaction with a shared understanding of the business being acquired.

In Europe, the "buyer beware" principle, or caveat emptor, is more dominant, meaning buyers bear more responsibility to uncover risks during due diligence. In contrast, US M&A is generally more buyer-friendly, with a greater emphasis on representations and warranties, placing more responsibility on sellers to make specific disclosures.

United States: buyer friendly

In the US, disclosure is a meticulous process. Sellers are expected to prepare detailed disclosure schedules that align precisely with each representation and warranty in the purchase agreement. These schedules are self-contained and rarely rely on external documents or data rooms, unless explicitly incorporated therein. Buyers in the US market demand clarity and specificity. Vague or overly broad disclosures are unlikely to stand the test of purchaser scrutiny.

This detailed process also has an impact on deal dynamics, timing and resource allocation. Management will typically be more extensively involved, supported by legal, financial and other advisers.

Continental Europe: buyer beware

In Europe, sellers usually rely on data room disclosures, with the entire data room incorporated by reference into the purchase agreement — a practice broadly accepted in the (continental) European market. This approach allows broader, less granular disclosures and shifts greater responsibility onto the buyer to conduct thorough due diligence, rather than relying on specific disclosures by the seller. The legal system emphasizes good faith, and the “fair disclosure” standard ensures buyers are protected by requiring sellers to present information in the data room in such manner that a reasonable buyer can understand its relevance and implications for the target business.

Sandbagging clauses: legal philosophy in action

Another transatlantic difference is the treatment of sandbagging clauses, which determine whether a buyer can seek indemnification for breaches they were aware of before closing.

Customary practice in the US shows that buyers can claim indemnification even if they knew about the breach. This protects reliance on contractual representations and encourages accurate seller disclosures. In contrast, anti-sandbagging in European transactions prevents buyers from claiming indemnification for warranty breaches of which they had prior knowledge, reflecting the duty to act in of good faith and preventing opportunistic behaviour.

In Belgium, for example, courts have ruled in certain cases that invoking indemnification for known issues may constitute an abuse of rights.

Warranty and indemnity insurance

The difference in approach between Europe and the US also extends to the warranty & indemnity (W&I) insurance process. In the US, insurers place significant importance on the vendor due diligence and disclosure schedules, expecting full and detailed disclosure. In combination with a legal environment that is more litigious in nature, W&I policies in the US tend to be more expensive and more heavily negotiated.

Conversely, in Europe, insurers are typically more flexible in their underwriting approach. The lower rate of post-closing disputes and claims contributes to more accessible and cost-effective W&I coverage. Implications for legal advisors

For legal professionals advising on transatlantic deals, these differences are more than academic. A good understanding of US and European market practices is essential. Advisors must guide clients through the implications of the different disclosure mechanisms and bridge cultural and legal gaps to facilitate smoother negotiations and align expectations.

Conclusion: strategy starts with structure

In today’s cautious deal environment, the structure of disclosures can make or break a transaction. Whether navigating the US or the European mechanism, legal advisors and dealmakers must tailor their approach to the jurisdiction at hand. By doing so, they not only mitigate risk but also empower clients to make informed and strategic decisions.

Should you be looking to explore transatlantic opportunities, our team brings extensive experience in cross-border deal making and welcomes the chance to discuss how we can support your strategic objectives.