Navigating in an Uncertain M&A Market: Four Legal Trends to Watch

As market volatility reaches unprecedented levels, successful dealmakers are turning to four key legal mechanisms to bridge valuation gaps and manage risk. The M&A market in 2025 is shaped by volatility and complexity. Geopolitical tensions, regulatory pressure, and macroeconomic uncertainty — including rising interest rates and inflation — have made transactions more challenging to structure and close. While deals continue to move forward, they increasingly rely on thoughtful legal design and flexible solutions.

At Van Doorne’s Corporate/M&A team, we observe four legal trends that are essential in this environment:

1. Warranty & Indemnity (W&I) insurance for more sophisticated risk allocation
2. Earn-out structures to bridge valuation gaps
3. Flexible partnerships as alternatives to full acquisitions
4. Material Adverse Change (MAC) clauses to safeguard deal certainty

These developments reflect a broader shift: legal innovation is no longer a luxury, but a necessity. In today’s market, the right legal structure can make the difference between a deal that stalls and one that succeeds.

W&I insurance: Advanced risk allocation

W&I insurance has evolved from a specialist product to mainstream deal infrastructure. In today’s uncertain market, W&I is increasingly used to bridge the gap between buyers and sellers on risk allocation. For buyers, it offers protection against unknown breaches of warranties and indemnities while accelerating transactions by reducing discussions. For sellers, it enables cleaner exits with reduced liability exposure.

Key developments include:

• Broader applicability: W&I insurance is now commonplace not only in large-cap private equity transactions but also in small- and mid-market deals, as premiums fall and insurers expand their appetite.
• Competitive pricing and coverage: Premiums and deductibles are at historic lows due to market competition, while exclusions are narrowing.
• Mature claims environment: The W&I market has developed a reliable track record, with efficient claims processes and higher payout rate.

Earn-Outs: Bridging the valuation gap

Valuations remain a contentious point in many transactions. In times of market stability, buyers and sellers often converge quickly on price. In today’s uncertain climate, however, future performance is difficult to predict and the gap between what sellers believe their business is worth and what buyers are willing to pay upfront is widening.

Earn-outs have re-emerged as essential pricing mechanisms to bridge valuation gaps between sellers and buyers. Under these structures, a portion of the purchase price is deferred and tied to future results over a pre-agreed period, typically one to three years, with EBITDA serving as the primary performance benchmark.

The advantages are clear:

• Buyers limit upfront investment and align payments with actual performance.
• Sellers gain the opportunity to prove their valuation expectations and benefit from future growth.

However, earn-outs are also a fertile ground for disputes, particularly around accounting methods, governance rights during the earn-out period, and whether the buyer has an obligation to actively pursue growth. Courts in the Netherlands and elsewhere have stressed the importance of precise drafting to avoid manipulation and conflicts.

Partnerships: A flexible alternative to full acquisitions

In a more cautious deal environment, we see increased interest in partnerships as alternatives to full acquisitions. These range from minority stakes and joint ventures to flexible contractual arrangements, allowing parties to pursue growth opportunities with shared risks and investments, while maintaining operational flexibility to adapt to shifting conditions.

Key benefits include:

• Lower financial risk: Shared investment and reduced upfront capital requirements.
• Operational flexibility: Partnerships can be scaled up, scaled down, or unwound more easily than full acquisitions.
• Future optionality: A partnership allows buyers to “test the waters” before committing to a full acquisition, while sellers can retain upside potential.

Partnerships can be structured through legal entities offering formal governance and transferable interests, or via contractual arrangements such as joint operating agreements, profit sharing agreements, consortium agreements, or alliance agreements. Entity-based structures provide legal personality and are more bankable but less flexible, while contractual arrangements offer maximum flexibility but with assets remaining with individual parties. In an environment where agility is crucial, partnerships offer a pragmatic alternative to expand into new markets, test collaborations and share risks.

Material Adverse Change clauses: Allocating the unknown

MAC clauses allocate risk between signing and closing, giving buyers a walk-away right if unforeseen events significantly harm the target’s business.

Recent market developments show a renewed focus on MAC provisions:

• Greater bargaining power for buyers: Following recent economic and geopolitical shocks, buyers are increasingly insisting on MAC clauses, especially in medium and large transactions.
• Negotiated scope and carve-outs: MAC clauses often use broad, vague language but are heavily negotiated. Sellers typically secure carve-outs for events beyond their control: economic developments, changes in law, war, terrorism, pandemics, and weather-related events.
• Carve-outs on carve-outs: Buyers often insist that carve-outs should not apply if the target is disproportionately affected compared to peers, which shifts the MAC risk back to sellers.
• Limited case law: Dutch courts have rarely ruled on MAC disputes, making outcomes unpredictable. However, past cases show that courts look at examine EBITDA to assess structural profitability when determining whether a MAC has occurred.

For buyers, MAC clauses can serve as a safety net. For sellers, they represent a threat to deal certainty. Careful drafting (balancing specificity with flexibility) is key to avoiding disputes and protecting both sides’ interests.

Conclusion: Legal innovation as a strategic edge in M&A

Despite global headwinds, the M&A market is far from stagnant. Deals are still being done — but success increasingly depends on creative structuring and smart legal planning. Tools like W&I insurance, earn-outs, partnerships, and MAC clauses reflect a broader shift: the need to allocate risk wisely, align incentives effectively, and preserve deal certainty.

This marks a fundamental change in M&A strategy. In today’s uncertain environment, legal innovation is no longer optional — it’s a competitive advantage. At Van Doorne, we help clients navigate this evolving M&A landscape by designing deal structures that balance ambition with prudence. The right legal architecture can turn a risky transaction into a successful one.

Opportunity still exists — for those who know how to find it.