A Slight Misunderstanding
In one acquisition, a domestic technology outsourcing company was contracted to provide key IT services through a twelve month transition period. Upon signature of the acqusition agreement, the integration transition team asked for the IT equipment access credentials. The outsourced service provider, a well know M&A services leader, refused to provide the credentials. The problem turned out to be a difference in interpretation of the contract agreements by the IT service provider subcontractors, also well known industry leaders. The acquired company spent the next four months renegotiating the contract and the subsequent release of equipment access credentials.
A review the transitional services contract revealed vague contract language with no enforceable service level agreements or “exit” clauses. The acquisition company management team implemented a successful strategy of appointing key staff members to review all service requests and develop direct line relationships with the subcontracting IT service provider to ensure delivery of services. The acquisition company had several large contracts with the subcontractor and had considerable financial leverage in driving service delivery.
All misunderstandings concerning contract specifications will eventually be resolved. The best time to do that is before the acquisition agreement is signed.
Tip: Hire dedicated IT contract M&A specialists to review, negotiate and (re) write all IT contracts prior to acquisitions.