Forecasts, warranties and due diligence in an acquisition
An EBITDA of €3.7 million promised, €427,000 achieved
A buyer acquired all the shares in a company (Fresh Leaf, with machine builder FTNON) in July 2018. The sellers had forecast an EBITDA for 2018 of €3.66 million — almost double that of the previous year — and on that basis an enterprise value of €34.4 million was mentioned. During due diligence the realised EBITDA up to and including May proved to be lagging, and the buyer openly doubted whether the forecast was achievable. The parties negotiated a discount of €2.65 million; the sellers stressed that their forecast of €3.7 million was "even on the conservative side".
Reality was different: over the whole of 2018 the company achieved an EBITDA of €427,000. The buyer claimed millions back — on two grounds: mistake (it had paid too much for the shares) and breach of the warranties given in the share purchase agreement (SPA), with partial rescission.
Where the line runs: existing facts versus a disappointing future
The Amsterdam Court of Appeal set out the framework sharply. The warranty in the SPA provided that the information supplied was "true", "accurate" and "not misleading". The realised EBITDA up to and including May — an existing fact — can be tested against "true" and "accurate". The EBITDA still to be achieved can only be tested against "not misleading". Importantly: being misleading does not require intent; what matters is whether facts that were known at the time were insufficiently reflected in the forecast and were material to the purchase decision. That the eventual EBITDA differed enormously from the forecast does not, of itself, make it misleading.
For the plea of mistake, the limit of Section 6:228(2) DCC applies: a mistake concerning an exclusively future circumstance is for the account of the mistaken party. A disappointing result is therefore not a mistake. But in so far as the forecast rested on an incorrect view of facts that already existed when the agreement was concluded — such as the misstated realised EBITDA — a plea of mistake is possible, with the remedy of relief of the disadvantage (Section 6:230(2) DCC) or, in the case of a breach of warranty, partial rescission and damages (Section 6:265 DCC and Section 6:74 DCC).
The heart of the matter lies in the nuance the court drew: although the full-year 2018 results were, under the agreement, for the buyer's account — after all, the buyer had assessed the future itself, doubted it and negotiated a discount — the misstated realised EBITDA remained relevant. It was warranted as a separate fact, and a buyer values the figure achieved to date when acquiring a company midway through the financial year. The distinction between existing facts and future expectations thus determines where the risk lies. Because the disputed corrections to the figures require an expert opinion, the court did not (yet) award a sum, but ordered an expert report.
Once a breach of warranty is established, the assessment of damages follows. That proceeds on the basis of the positive contractual interest: the buyer is placed, as far as possible, in the position it would have been in had the warranted facts been correct — not in the position as if it had never bought. In damages proceedings following a share transaction the Amsterdam Court of Appeal expressly returned to that point: what is decisive is not whether the sale would have gone ahead without the incorrect information, but the value the buyer would have received under a correct warranty.
What does this mean for buyers and sellers in an acquisition?
For the seller: a forecast is not a non-committal estimate. Where it is covered by a warranty (true, accurate, not misleading), it binds — and misstating already-known facts amounts to a breach of warranty and a mistake, even without intent. For the buyer: due diligence and a negotiated discount shift the risk of the future, but do not remove a claim based on incorrectly represented existing facts. It pays to distinguish sharply in the SPA: firm warranties on historical and current figures, and for the uncertain future an earn-out under which part of the purchase price moves with the actual results. Even on a sale "in the state in which it is", the seller remains obliged to share what it knows during due diligence and what matters to the buyer; if it conceals known, negative information, it breaches its duty to disclose (cf. District Court of Amsterdam on a concealed inspection report in a real-estate transaction).
Finally: a breach of the duty to disclose is not, in itself, enough. Mistake requires that the seller could have known the decisive significance of the information for the buyer (the recognisability requirement), and rescission a breach of sufficient weight. In a recent case on the purchase of a commercial building the seller concealed a supplementary lease; the breach was established, but the buyer's claims failed precisely on those thresholds (District Court of Central Netherlands, January 2025).
Frequently asked questions
Is a disappointing forecast after an acquisition a ground for mistake?
Not in itself. A mistake concerning an exclusively future circumstance is, under Section 6:228(2) DCC, for the buyer's account. Only in so far as the forecast rested on an incorrect view of facts that already existed at the time of purchase can a plea of mistake succeed.
Must a warranty have been breached deliberately in order to litigate on it?
No. Whether information is "misleading" depends on whether known facts were insufficiently reflected and were material to the purchase decision — not on the seller's intent. A warranty of "true, accurate and not misleading" information can therefore be breached even without intent.
Does due diligence protect the seller against liability?
Partly. Due diligence and a purchase "in the state in which it is" place much of the risk on the buyer. But the seller must share known information that is relevant to the buyer. If it conceals that information, it breaches its duty to disclose — even if the buyer carried out its own investigation.
Cited case law
Courts of Appeal: ECLI:NL:GHAMS:2023:925 (Amsterdam Court of Appeal, 18 April 2023) · ECLI:NL:GHAMS:2020:2299 (Amsterdam Court of Appeal, damages proceedings)
District courts: ECLI:NL:RBAMS:2024:292 (District Court of Amsterdam, 17 January 2024) · ECLI:NL:RBMNE:2025:111 (District Court of Central Netherlands, 22 January 2025)