Before finalizing a merger or acquisition, contract reviews are a form of investigation. The acquiring business needs to understand any and all contract features that could cause challenges to the business once the deal has been completed. But that’s only step one of the process.
Once the merger or acquisition moves forward, the next thing to do is to address any issues uncovered during the pre-transaction review, and make sure all of your incoming contracts are treated just like any other existing contract in your portfolio. After all, every contract belonging to the target company is now the acquiring company’s responsibility.
Here are three things you can do to reduce contract risk once the M&A transaction has been completed:
Incorporate all new contracts into your contract management system
Successfully identifying the potential risks in contracts that belonged to the target company is a critical part of the due diligence process, but just as important is the ability to take the actions needed to correct or mitigate those risks. The best way to ensure that all of these new contracts and their risks are managed appropriately is to incorporate them into your existing contract management system. Having a robust, well-organized system in place to manage contracts will make it easy to upload and track all of the new agreements, and take actions to address potential risks when necessary.
Follow through on outstanding items
During the pre-transaction review, legal counsel should have identified areas where additional documentation, notices, or other materials are needed to transition contracts smoothly and fill in any gaps. Once the merger or acquisition agreement is settled, you’ll want to be sure to follow through on any actions still outstanding and provide any additional documentation requested to complete the process.
Monitor the contract review process closely
It’s common for some departments and team members to need extra attention following a merger or acquisition. Department heads and company leadership need to know who’s thriving or struggling and which jobs have become redundant. Contracts are not all that different. It’s possible to miss a redundant contract or overlook a new issue that’s arising, even with contract reviews happening throughout the process. Just like nobody would expect you to immediately know all of your new teammates and colleagues, you can’t be expected to memorize thousands of contract expiration dates, either, but it’s important to take steps to get control that new information as quickly as possible. Paying extra attention to contract review in the initial phases following the merger or acquisition can help catch the final adjustments needed to complete a smooth contract transition.
The Contracts Checklist for M&A Due Diligence addresses some ways to address issues uncovered during the pre-transaction review, and processes to implement once the merger or acquisition moves forward. This eBook also contains a non-exhaustive list of important contract types to help keep track of the contract categories that need to be reviewed and understood during the due diligence process.
Download your copy of the checklist today to start preparing for a successful M&A transaction.