Contract Management – How to Handle an Acquisition

There are a number of reasons why a company acquires another business (market growth, intellectual property, vertical integration, etc.). Whatever that reason, the difference between a successful acquisition and a costly mistake is in the execution. Management has told you what needs to be done, so all you have to do is get it done.  What could possibly go wrong?!

Successful integration is a time sensitive matter and there is often an awkward handoff between the M&A team and the operations team. The deal is done and the champagne has been corked but the work is not over. How does the operational  team successfully integrate the newly acquired business? A good place to start is to get an understanding of what vendor/supplier/manufacturer contracts the newly acquired company has in place. After all, if this is an equity deal then most likely their payment obligations are now your payment obligations! Start with the due diligence documents collected (to determine a price at a point in time), if you have access, as due diligence attempts to determine the benefits, risks, rights and obligations that might be acquired along with the company. However, your team will also need to gather additional details regarding your new assets, obligations, and vendors. This will require compiling data from each department. The best sources of data are usually the following:

• Current and previous year’s financial/budget reports: This should give you an idea what dollars have been spent and with whom.
• Spreadsheets: This will give you a glimpse into when contracts may be coming due.
• File Cabinets/Desk Drawers: This should help you understand what you own and your obligations.

Once you start gathering this information you are going to need a common repository for all the details and supporting documentation you find. A common spreadsheet may get the job done, but it is certainly not the most effective means of managing this information long-term. I would recommend an online contract management portal. You can customize the fields you want to track/manage, attach all supporting documentation, build automated reporting, build notification reminders for when action is required, and much more. If you do not adopt a contract management system you may end up recreating  your work each time someone asks a question rather than augmenting the data captured from the last request.

It is important to note that your initial goal is not to start making decisions about contracts you would like to transfer, renew, or cancel. It is to get everything into one spot so you can tackle each decision when the time is appropriate. Some contracts you unearth may be coming due within 30 days and require immediate attention. Others may be active for another year or two and can be addressed down the road. Integrating your people and processes will be a challenge in and of itself; don’t let your contractual information go back into the file cabinets.

Feel free to connect with Trident (tsteiner@www.trident-it.com or 608-276-1909) if you have questions or need help making sure your next acquisition goes smoothly from a contract management perspective.