Breach of Warranty Loss Quantification
Establish the true and warranted financial positions, value the business under each scenario, and calculate diminution in value.
Breach of warranty loss quantification is the core forensic accounting deliverable in most M&A warranty claims. The expert establishes what the accounts showed (the warranted position), what they should have shown (the true position), and the financial impact of the difference.
The primary measure of loss is diminution in value: the difference between what the buyer paid based on the warranted financial position and what the business was actually worth at completion based on the true position.
Instructions must be consistent with standard market value definitions. Inspired Education v Crombie [2025] demonstrates that improper instructions fatally undermine expert evidence regardless of technical quality.
Methodology
- Review SPA warranties and limitation provisions
- Reconstruct true financial position at completion
- Apply agreed accounting basis and standards
- But-for valuation and quantum analysis
Frequently Asked Questions
How is diminution in value calculated in a warranty claim?
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