Atten Bidco v Assassa [2025]: a “bugger of a contract” and a lesson in fair disclosure on M&A deals

In Atten Bidco Limited v Anna Assassa & Ors [2025] EWHC 2347 (Comm) HHJ Worster in the High Court provided a lengthy decision that should be of interest to those involved in writing, negotiating and signing up to warranties and their corresponding disclosure mechanics on M&A transactions.  Selling management being pushed by buyers to attend disclosure calls and meetings take note in particular.

The facts

The lengthy judgment trawls through extensive documentary and witness evidence so as to establish whether or not there had been a breach of warranty under a sale and purchase agreement (“SPA“).  That exercise is not repeated here, but the headline facts were as follows:

• the claim arose from a post-acquisition dispute following the acquisition of Tisski Limited (an IT consultancy) by Atten Bidco Limited;
• the defendants were the former shareholders and managers of Tisski, and included founder and CEO, Anna Assassa, and the Finance Director, Richard Baxter; and
• Atten Bidco had acquired Tisski’s entire issued share capital from the defendants under a sale and purchase agreement signed in November 2022 and for a headline price of  £45 million.  Completion occurred in December 2022.

Atten Bidco claimed for damages arising from breach of certain of the warranties (provided by the defendants in the SPA) under three heads of claim:

1. The NAO contract

• Tisski had entered into a major fixed-price contract with the UK National Audit Office (“NAO“) in March 2022 for the delivery to NAO of a complex audit management system.
• Atten Bidco alleged a breach of warranty under the SPA, claiming that the NAO contract “could not readily be fulfilled or performed… on time or without undue or unusual expenditure of money or effort”.
• The judgment goes through the detail of what was described by the claimant’s CEO as a “bugger of a contract”, and brings into sharp relief the challenges and risks involved in fixed price quotations to procure highly-complex multi-stage contracts.

2. The Aquila contract

• A contract had also been entered into between Tisski and Aquila Air Traffic Management Services Limited in March 2022.  The agreement was terminated by Aquila just days before the SPA was signed.
• Atten Bidco alleged a breach of warranty under the SPA based on the loss and non-disclosure of the Aquila contract, arguing that Aquila constituted a significant customer whose loss had, or was likely to have, a materially adverse effect on Tisski’s business.

3. The MOD / locked box claim

• The SPA contained a locked box price adjustment mechanism (meaning that the transaction was a fixed price deal with that price set at the locked box date 30 June 2022), with no post-completion true up of working capital as one sees on a completion accounts transaction.
• Atten Bidco claimed for breach of warranty under the SPA as to the accuracy of the locked box accounts.  The claimant alleged that approximately £90,000 of work in progress related to unbilled work for the Ministry of Defence (“MOD“) should not have appeared in the locked box accounts as an asset and should in fact have been written off down to zero.
• Extensive evidence was considered by the court as to whether Tisski staff knew that payment for the MOD work was improbable because the work had been undertaken otherwise than on a proper contractual footing, notwithstanding that the work in progress appeared as an asset in the accounts.

Atten Bidco maintained that, as a result of these issues, Tisski’s EBITDA had been inflated by £1 million.  Having agreed to a purchase price for Tisski that was ten times EBITDA (of £4.5m * 10 = the £45 million), Atten Bidco claimed for damages of £10 million.

The defendants argued that there had been no breach of warranty since the matters complained of had been “Disclosed” by means of the process set out in the SPA.  They argued in particular that:

• disclosure had been allegedly achieved through a combination of oral statements made during due diligence meetings in October 2022 and the uploading of a “cut” from an internal ‘RAG’ report to the data room shortly before the SPA was signed;
• the NAO contract was still forecast to be profitable as at the date of signing the SPA and therefore did not fall within the scope of the specific warranty as to loss making contracts;
• Atten Bidco had curtailed discussion about the NAO contract once it was told the contract was not loss-making, thereby preventing further disclosure, and that the claimant should therefore be estopped from claiming inadequate disclosure;
• the Aquila contract had not been listed as a “Material Contract” in the SPA; and
• hindsight was being used to treat – what at the time were viewed as – routine project issues as warranty breaches.

Decision

The court ruled in favour of Atten Bidco, which succeeded on all three parts of the claim.

The standard of disclosure set by the wording in the SPA of the definition of the term “Disclosed” – “fair disclosure with sufficient detail to enable a reasonable buyer to identify the nature and scope” – was considered and the defendants, who were found not to have satisfied that threshold.  In particular:

• The upload to the data room at the 11th hour of a RAG report in which some of the problems with the NAO contract were mentioned did not constitute fair disclosure.  The only safe route was, presumably, for the warrantors to have set out those problems in some sensible level of detail in the disclosure letter itself and in a form so that Atten Bidco could have immediately understood what those problems were and which of the warranties were likely untrue as a result.
• The defendants were contractually barred from relying on oral statements made during due diligence meetings to enlarge the scope of the formal disclosure materials. The court applied the SPA’s entire agreement clause, concluding that the reliance on isolated oral statements would undermine the focused contractual disclosure mechanism the parties had agreed upon.
• The defendants’ pleaded argument for equitable estoppel also failed, as the representation relied upon lacked the necessary clarity and specificity required by law.

Measure of damages

The court awarded damages of £2.4 million.  Atten Bidco had effectively called for a pound for pound measure of damages (to that £10 million sum referred to above) that tracked the reduction in Tisski’s EBITDA.  Instead, the court applied the established legal principle that warranty damages are compensatory, not punitive, and must reflect the bargain struck, not compensate for disappointed expectations.

The court took a) the value paid by the claimant (£45 million, i.e. the value agreed to on the basis that the warranties were true) and subtracted from it b) the actual value, being a) less the value of the commercial impairment to Tisski arising from the warranties being untrue and as follows for each of the three claims:

• as to the NAO contract, the commercial quality, reputation, and perceived future prospects of the business had been adversely affected and a value of £2 million was attributed;
• as to the Aquila contract, revenues of £312,000 had been lost and damages were awarded on a pound for pound basis but the issues were not of the scale or effect which required a re-appraisal of the wider reasons behind the acquisition of Tisski; and
• as to the MOD work in progress and the locked box, this was a quantifiable loss and the £90,000 referenced in error in the locked box accounts was awarded as damages.

Concluding thoughts

Buyers and sellers of companies and businesses will have once again noted the courts’ identification of an entire agreement clause and their reluctance to then look beyond the four corners of the pages of the SPA to interpret the commercial bargain struck between the parties.  In this case that included not giving weight to the content of what had been discussed at a number of due diligence calls and discussions, no doubt organised at the time at the request of the buy side.

Prudent sellers should take proper advice and set out in writing in the disclosure letter those matters which qualify the warranties or which might cause them to be untrue.  Relying instead on prior oral discussions and wording in documents buried somewhere in a data site will invariably expose sell side warrantors to unwanted, and perhaps unexpected, levels of risk.  If matters are disclosed and then discussed orally on disclosure calls or meetings, the warrantors should be updating the disclosure letter afterwards to set the record straight and so as to head off any claim under the warranties following completion.

All the thoughts and commentary that HLaw publishes on this website, including those set out above, are subject to the terms and conditions of use of this website. None of the above constitutes legal advice and is not to be relied upon. Much of the above will no doubt fall out of date and conflict with future law and practice one day. None of the above should be relied upon. Always seek your own independent professional advice.

Humphreys Law