Archive: June, 2013

How Good Contracts Protect You from Bad Haircuts in M&A Transactions

In the context of an M&A event, a “haircut” is generally not a good thing. In fact, a haircut on your company valuation can be a very bad thing, discounting your value to the tune of millions of dollars. And if your contracts contain certain valuation-shrinking clauses, it is exactly what you’ll get.

To avoid unwanted haircuts, forward-thinking legal and sales ops teams are well-advised to do two things: First, review existing revenue contracts to understand where important value-protecting clauses are missing, or value-shrinking clauses are lurking. And second, ensure that the inclusion/exclusion of these clauses is built into your standard contract drafting and negotiation playbook going forward.