As a follow on to the blog to Skeleton Hunting, here are some key things that a buyer may look at when looking through your contracts:
Key Legal Contract Issues to Watch Out For:
- Change of Control Clauses: Contracts that allow renegotiation or termination if ownership changes, impacting relationships post-sale.
- Termination and Renewal Terms: Unfavorable or unclear clauses that complicate exiting or renewing contracts.
- Exclusivity Agreements: Contracts that limit the buyer’s future flexibility with exclusive partnerships or suppliers.
- Non-Compete and Non-Solicitation Clauses: Restrictions on key employees or partners that prevent competition or client poaching after the sale.
- Indemnity Provisions: Obligations to cover losses or damages under certain conditions, which could be a liability for the buyer.
- Unfulfilled Obligations: Outstanding contractual duties that could become inherited liabilities for the buyer.
- IP Ownership Issues: Clear establishment of intellectual property rights to avoid disputes over ownership.
- Dispute Resolution Clauses: Contractual methods for resolving disputes that can affect future legal costs and complexity.
- Liability Limits: Caps on liabilities that impact the risk profile of the business.
- Regulatory Compliance: Ensuring contracts comply with laws and regulations to avoid penalties or void agreements.
- Data Privacy and Security: Compliance with data protection laws to avoid legal risks related to personal data.
- Assignment Clauses: Requirements for third-party consent to assign contracts to a new owner, potentially delaying the sale.
- Warranties and Representations: Accurate statements in contracts to prevent legal disputes over misrepresentation.
Want some help looking at your contracts and understanding how a buyer would view things? Reach out!
