Management Consulting

In a notable case involving Liberty GTS and private equity firm FSN Capital, a W&I insurance claim was settled for €50 million due to financial manipulations related to FSN's acquisition of Gram Equipment, a Danish ice cream equipment manufacturer. Despite this significant payout, FSN faced additional losses exceeding the policy limit and pursued the sellers for the shortfall, leading to a claim of €87.5 million in the Maritime and Commercial High Court in Denmark. In November 2023, the court ruled that while the management of Gram Equipment had acted in a manner that could incur liability, there was no recoverable loss beyond the W&I insurance payment. The court found that the actual value of Gram Equipment at the time of transfer was €60.2 million, significantly lower than the warranty true value of €90 million. This decision was based on an expert opinion and the context of the bidding process, which indicated that the purchase price should be viewed in isolation. Consequently, since FSN had already received €50 million from the W&I insurance, the court concluded that they had not suffered any additional loss. The ruling was not unanimous, with two judges dissenting, and FSN is currently appealing the decision. This case highlights the complexities of valuation in M&A transactions and the role of insurance in mitigating risks associated with financial misrepresentations. The court's judgment suggests that insurers may scrutinize the purchase price as a measure of business value, which could impact future claims and the interpretation of warranty true values in similar contexts.