The purchase agreement is signed. The ink is dry and the glasses are empty, but the real dispute is only just beginning. A surprisingly high percentage of cross-border M&A transactions end in arbitration. The often overlooked detail that makes all the difference: linguistic nuances that were not properly managed during the transaction.

We’ve all seen this happen before: A company acquires a competitor in another country. The Share Purchase Agreement (SPA) was drafted in English, negotiations took place in three languages, internal presentations were prepared in German, and due diligence reports were submitted in English. Once arbitration begins, all these documents are consolidated—and suddenly every word counts.

The transaction is complete. The dispute only begins after the deal is done

M&A Commercial disputes rarely escalate merely because parties have competing interests; they escalate because linguistic ambiguities and unmanaged nuances in negotiation documents obscure the original intent of the agreement. What may seem like a minor concession during M&A negotiations frequently becomes the central issue in post-closing arbitration that could result in claims worth millions. The issue could be anything, from a slightly different translation of a clause term to an inconsistent glossary between the SPA and disclosure schedules.

Mergers and Acquisitions – language risks throughout the lifecycle

Language complexities aren’t isolated to one stage of the merger but rather permeate the entire M&A process. The main sources:

LOIs and Term Sheets: Often drafted in the language of the lead investment bank, then translated or summarized internally—usually without any terminology review.
Share Purchase Agreement and Warranty Schedules: The SPA is typically drafted in English. If translations are necessary for local shareholders, supervisory board members, or regulatory authorities, the resulting parallel versions often lack coordination, leading to inconsistencies.
Disclosure schedules: These SPA annexes frequently contain documents in the target company’s local language. These translations are often produced under time constraints and are not cross-checked against the language of the contract.
Internal communications as future evidence: Emails, management presentations, and board minutes generated during the transaction are frequently used as evidence in arbitration proceedings. If an internal German presentation uses a term differently than the English SPA, it creates vulnerabilities.
Due diligence reports and expert opinions: Financial, legal, and technical due diligence reports are often prepared or translated into multiple languages. Discrepancies between the language versions can later be used as evidence that a party was aware of certain risks – or not.

International M&A activities are almost always multilingual and thus extremely prone to misunderstandings. However, clear communication is essential in this line of work.

Typical points of contention in Mergers and Acquisitions

Not every dispute surrounding a merger or acquisition ends up before an arbitration tribunal. But when it does, the disputes often revolve around the same types of clauses. These clauses create significant room for linguistic misinterpretation:

Purchase Price Adjustment Clauses: The calculation of the final purchase price often depends on definitions such as Net Working Capital, Cash, or Debt. These terms sound familiar, but they are defined differently across various accounting standards and legal systems. If “Net Working Capital” is defined in English in the SPA and later translated into German for a local court or regulatory authority, the translation may unintentionally shift the calculation parameters.
Earn-out clauses: Earn-outs are performance-based purchase price components tied to specific financial metrics. The definitions of these metrics (often EBITDA, revenue, or specific KPIs) must be identical in all language versions. Even subtle translation differences can lead to parties adopting conflicting calculation frameworks.
MAC Clauses (Material Adverse Change): These clauses govern the circumstances under which a party may withdraw from the deal. The term “material” is deeply rooted in English case law, making direct equivalence in German legal terminology impossible.
Warranty and liability issues: Warranty catalogs contain dozens of definitions. Success relies not just on accurate terminology, but on absolute consistency across the entire catalog as well as between the catalog and the disclosure schedules.

At stake are rights, obligations, and liability issues that can arise from seemingly marginal differences in wording. Linguistic precision here is not just nice to have. It is a fundamental building block of risk management in any cross-border transaction.

How poor translations can undermine M&A arbitration proceedings

Once the dispute escalates into formal arbitration, additional language risks arise that extend beyond the explicit contractual language:

Inconsistent terminology in pleadings and transcripts: If the plaintiff’s side translates a term differently in its pleadings than the respondent’s side does, it creates the impression of inconsistency or inaccuracy for the arbitral tribunal. It doesn’t matter if both translations by the two companies are reasonable on their own. Consistency between the transaction and the dispute phase is therefore not merely a stylistic choice. It is a strategic necessity.
Ambiguous presentation of financial expert reports: Financial expert reports submitted in arbitration proceedings must be translated accurately and consistently. An incorrect representation of valuation methods, discount rates, or balance sheet items can undermine the expert’s argument or call their credibility into question.
Legal opinions and their translation: Legal opinions from different jurisdictions must be translated in a way that preserves the nuances specific to each legal system. A translation that fails to correctly identify the German “eingeschränktes Testat” as a “qualified audit opinion” can materially alter the facts of the case.
Witness testimony and hearings: When witnesses testify in their native language and their testimony is translated simultaneously or after the fact, there is a lot of room for interpretation. Draft transcripts circulated after the hearing should be reviewed by specialized translators before they are accepted as official procedural documents.

The stakes are incredibly high! A party whose documents appear linguistically inconsistent loses credibility. This is true regardless of whether the inconsistency is relevant to the substance of the case. Arbitrators are experienced enough to view linguistic precision as an indicator of overall professionalism.

Strategic management of multilingualism in M&A disputes

But there is some good news: Most language-related risks in M&A arbitration proceedings are avoidable, as long as they are addressed early on. Specific recommendations for in-house counsel and external counsel:

Early involvement of a specialized translation agency: This applies not only when a dispute arises, but throughout the entire drafting process of contracts and disclosure schedules. Cutting corners on translation here will cost you more in the long run.
Consistent terminology management throughout the entire deal lifecycle: A coordinated glossary, ideally stored in a term bank, ensures that the LOI, SPA, disclosure schedules, and subsequent pleadings use the same terminology. This is not bureaucracy, but a key asset for risk mitigation.
Coordination of language versions prior to witness depositions and hearings: Witnesses should know which translations are being used for key concepts in the proceedings. This prevents unexpected surprises during the hearing, such as when a term is translated differently than in the witness’s own preparation for testimony.
Review of draft minutes: Minutes of proceedings should not be accepted without careful consideration. A specialized translation agency can review draft minutes for terminological consistency before they are incorporated into the official proceedings.

Specialized translation agencies with experience in M&A and international arbitration law do more than simply convert text from one language to another. They are not a cost factor here, but rather a strategic investment in efficiency and security. They also ensure that a merger or corporate acquisition proceeds without negative repercussions.