3 Steps to Reduce Contract Risk Following an M&A Transaction

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:

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4 Habits of a Successful Legal Risk Management Team

A failure to address legal risks before they turn into actual problems can be devastating in the business world. From breaches of contract to compliance failures, companies that do not take steps to recognize and address their legal exposure can end up on the hook for damages, fines and penalties, and reputational damage.

But though some element of risk is generally inherent to conducting any type of business, not all exposure should be seen as inevitable. By applying some of the key principles of risk management to contractual and legal dealings, enterprises can proactively take steps to limit their risk of losses, as well as mitigate the level of damage they experience should a breach of contract or other problems occur. This is called legal risk management, and here are four key habits the best teams typically possess to inform their approach.

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Understanding Contract Risks Before Completing an M&A Transaction

Conducting contract due diligence both before and after a merger or acquisition is critical to the success of a business transaction. The state of a business’s contracts holds important information about the value of the business, as well as potential liabilities. 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 down the road.

Here are four things to look for before an M&A transaction is finalized:

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Contract Management Strategies: 3 Ways Yours Might Be Putting You at Risk

Most businesses wisely invest a great deal of time and effort negotiating contracts they believe will best mitigate their contractual risks. According to benchmarking data from the International Association of Contract and Commercial Management, the investment of time and resources for negotiating and reviewing simple contracts averages $5000, while high-complexity agreements, which can involve extensive back and forth negotiations, cost $40,000 on the low end and $200,000 on the high end.

While this may seem like a steep up-front investment, it’s a smart one. From delayed deliveries that can slow or even derail important projects to compliance violations and resulting fines, important business arrangements can be rife with risk – and the legally-binding framework of a contract is an important tool for proactively reducing risk exposure.

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Construction Contract Management: Achieving an Optimized Contract Lifecycle

There are a host of consequences when a construction project doesn’t go as planned. A single delayed shipment of supplies can cause further work interruptions, resulting in cost overruns and other issues, while compliance failures can create a slew of other problems. But because all of the relationships within construction projects are guided by contracts, effective contract management can be an important tool for making sure everything happens the way it’s supposed to.

Contract management is an organized and systemic approach to ensuring that all aspects of a contract, from deliverables and delivery dates to part and supply specifications, are adhered to during the contract term. In construction, careful contract management can help to ensure that every aspect of a build goes according to plan, and also help to reveal potential problems before they run the risk of derailing a project altogether. It is also key to keeping costs in check.

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Contract Management Tools for Reducing Contractual Risk

Contracts provide a clear and legally-binding framework for navigating all of your business dealings, from employment arrangements to purchase deals for key parts and supplies. While well-defined contract terms can help to reduce any risks related to your business arrangement, a contract alone is only of limited power. It is through the effective management of contracts that businesses truly reduce their vulnerabilities.

Fortunately, technology has greatly improved the discipline of contract management, providing features that make it easier and more efficient to handle agreements at every stage. To reduce your contractual risks, look for these four tools.

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Do You Know What's in Your Boilerplate Provisions? (Hint: You Should)

As the name indicates, “boilerplate provisions“ are legal clauses in a document that rely on “boilerplate“ language, often varying little between different contracts.

However, the term “boilerplate“ doesn't imply that this topic is to be taken lightly. In fact, not paying full attention to the language inside boilerplate provisions can be highly costly in terms of unpleasant surprises down the road. In this article, we'll discuss what boilerplate provisions are and why they can actually make or break a contract.

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4 Types of Breaches of Contract You Need to Be Aware Of

Breach of contract: it’s a risk faced by anyone who enters a legal agreement. If you deal with volumes of agreements (and volumes of types of agreements, from employment contracts to vendor and customer deals), chances are good that eventually you will run into a contract that doesn’t deliver on the terms agreed to by all parties.

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4 Trends Driving the State of Contract Risk Management

Anyone who uses corporate contracts will tell you that managing such agreements is really about managing risks. With that, the majority of corporate revenues are typically tied into agreements with customers and vendors, the effective mitigation of contract risk plays a major role in a company’s ability to realize the full value of hard-won business agreements. Proactive contract risk management also enables businesses to limit costs, penalties, and other fallout when things don’t go as planned.

But risk landscapes are constantly changing – for better and for worse. While some innovations can help businesses identify and contain potential threats faster and more effectively, other forces, such as shifting regulations require greater diligence than ever before.

Here are four key trends that are currently driving the state of contract risk management.

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Contract Management Year-End Highlights and 2019 Trends

As 2018 draws to a close and we look to the future of contract management, it's important to review some of the significant changes and innovations we've seen over the last year. We expect many of these trends to continue and grow into 2019, with contract management becoming more automated and convenient for all different types of businesses.

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