Here is a template to help you protect and build your company worth
When selling your company, here is a future scenario to avoid. During due diligence, the potential acquirer conveys after reviewing all your open customer and supplier contracts that there is language your team accepted that is causing concern for them. Things like:
- They actually can’t entertain acquiring your company because you have an agreement with a customer that gives them the right of first refusal to acquire your company.
- A customer and/or supplier has the right to approve or disapprove who you might sell your company to – and/or they have the right to advance notice of your plans of selling your company even before the transaction is finalized.
- The contract with a key customer becomes null and void the minute you sell your business.
- A customer and/or supplier has the right to use your intellectual property in their product/service.
- Your company is exposed to future claims of unlimited cost due to the wording in the indemnification language.
- The contract has language limiting your ability to change pricing despite year over year changes in material or labor costs.
Ask yourself this question – who at my company is the owner of ensuring that ALL contract language we sign up for has been reviewed knowing the future impact the terms could have on a future exit? Here is a great template (Contract Terms and Company Worth) for using each time you sign a contract, look for these clauses and ensure you pay extra special attention to how you negotiate them. Doing so could help avoid a future headache and keep your company worth from being impacted negatively.
