3 M&A contract separation challenges and how to fix them
Recognising the common pitfalls associated with contract separation in financial services restructuring will enable you to plan ahead and significantly increase your chances of delivering a more streamlined transaction.
Here are the top three challenges to watch out for:
1. Contract discovery
Finding all contracts that require treatment is a challenge as few organisations have up-to-date contract registers and agreements will need to be gathered from many parts of the business.
Contracts can come out of the woodwork even at the end of separation, which is detrimental to confidence and delays the separation process. Setting up clear guidelines and a timeframe for contract discovery at the start is key to success.
2. Supplier communications
Many organisations make the mistake of over-complicating the communications to suppliers. If communications are too complex, suppliers will revert to their Legal departments to decipher and understand the message.
Keeping supplier communications as simple as possible will increase the chance of a positive supplier response and accelerate progress.
All areas of the business are affected differently during commercial separation and conflicts of interest are not unusual. Procurement will be in the spotlight as it deals with the separation of the actual third-party contracts underpinning the services, and will often receive conflicting messages from different business areas. Setting up a central governance structure from the get-go is crucial to control the process.