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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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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The Importance of Contract Management Procedures in Mergers and Acquisitions

Mergers and acquisitions are some of the most complicated business events an organization can face. The transaction is complex and time-consuming. There are seemingly endless moving parts to consider. Executives need to integrate or restructure entire business systems, set strategic goals, and assign the right people to direct projects and programs throughout the process. Not to mention that a merger or acquisition often involves transitioning hundreds of employees, and thousands of contracts. If contracts get neglected, they can introduce dangerous risks for the business.

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Proper and Consistent Contract Management Vital for Due Diligence

Most companies are bound to go through a due diligence investigation at some point, and this is particularly true for startups. It doesn’t matter whether a company has been through the due diligence process dozens of times or is experiencing it for the first time, it can be a downright daunting experience. Some due diligence investigations will drag on for months on end, and the request for documentation often seems never-ending. However, with the right preparation and organization, a due diligence investigation can be a relatively hassle-free, even routine course of action.

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