Why Serial Acquirers Need a Contract Analysis Partner During Due Diligence
Strong returns and low risk are the perfect outcome for any acquisition, but it’s not one that’s easy to replicate. Successful programmatic acquirers pinpoint multiple small-to-mid-sized acquisition targets each year and navigate the closing process while generating shareholder value upon completion.
What’s their secret to success? The answer depends on who you ask.
McKinsey & Co suggests the formula relies on creating an M&A blueprint, unwavering focus, and strong internal conviction. Deloitte says that post transaction success is dependent on a target company’s relationships with suppliers and customers, which is often overlooked and underappreciated. If these relationships are allowed to be disrupted, it can affect the success of an M&A.
Whatever drives success, everyone can agree that identifying as many potential risks as possible during due diligence is fundamental to making high-yielding deals.
While the CFO and accounting team review the balance sheet, you need a cost-efficient yet high-quality partner to analyze an acquisition target’s contracts. Here’s the value you’ll obtain from finding the right contract analysis services to perform that critical function.
Increased Speed
Since serial acquirers are often conducting multiple deals in a year, there needs to be a streamlined system for leaders to quickly extract and review essential metrics and data points. Experienced due diligence support partners know where and how to search for structured data that can inform dealmaking.
Traditionally, searching for contract term, renewal, assignment, change of control, and termination positions can take days or weeks and cost many billable hours. With our AI-powered data models, these searches to be done in a flash. With the help of our scalable teams of attorneys, you can then validate the accuracy of AI-extracted data quickly and confidently.
If you routinely work with the same partner, you can also cut out some of the bureaucratic hassle at the beginning of each due diligence assessment. Imagine avoiding the friction of papering an agreement with a service partner and initiating the review process by simply sending an email to kickoff the due diligence contract review. This type of responsiveness is invaluable in situations where time is of the essence (e.g., during short exclusivity windows).
Enhanced Due Diligence Perspectives
Whether you plan to increase M&A activity or are a seasoned acquirer, you want a due diligence support partner that understands the factors influencing your decision making. This is where involving additional attorneys in the review makes a massive difference.
Of course, your in-house counsel will review key documents or outliers found during a review, but having supplemental perspectives involved in the early review stages can prevent expensive mistakes. Our knowledge of the customary key data points in the due diligence review (assignment, term, termination, etc.) can enhance the speed and efficiency of your contract analysis.
Moreover, a designated project manager who has experience practicing law will be assigned to each review, which reduces your risk even more.
Greater Customization
No-one understands your organization’s business strategy and pain points more than you. You know what information is important to appraise from an industry standpoint, but also from an internal business perspective. Having an established due diligence support partner that can create a tailor-fit solution for your team helps on both fronts.
For instance, one of our real estate clients heavily focuses on term and termination provisions. It’s important that they’re not tied down to contracts with secondary service providers when they already have a roster of established and trusted partners. At the end of a diligence, they want to know two things:
- Can I get out of a particular contract if I close this deal?
- What financial penalties exist if they do want to terminate a contract early?
One of our cybersecurity clients required IP-focused due diligence support while attempting to acquire a SaaS company. Much of what our client wanted to learn about the target acquisition wasn’t going to be contained in balance sheets, but in the patent and IP provisions of their contracts. Our review dug into contracts to verify that there weren’t instances of IP joint ownership or rights to royalty payments from IP.
Frequent collaboration also optimizes future reviews. After partnering with a client multiple times, we know what topics, issues, and contract types matter the most in their dealmaking process. With that familiarity, there are fewer modifications or amendments that need to be made to the final report, accelerating your response time even further.
Why You Should Work with Legalpeople
When you work with Legalpeople, you benefit from our:
- AI-powered data extraction
- Scalable team of attorneys to conduct quality control (or first pass review of complex issues)
- Project managers with legal expertise
- Interactive structured data
The last point is especially critical. Our standard deliverable permits filtering and reporting inherent with a structured data output, but we also provide the option to access our review workspace to provide a clean dashboard of key contract data and a dynamic way to interact with the information uncovered during the review.
Here’s a brief demo showing the value:
If you want M&A dealmaking to be, as McKinsey & Co put it, “a capability and not an event,” you need to be operating with a partner that can enhance your due diligence process.
Want help accessing due diligence data? Find out how Legalpeople helped a client with their tight due diligence deadline.