M&As are on the rise
Mergers and acquisitions are business transactions where the ownership of companies is transferred to or consolidated with another company.
With recession looming on the horizon, companies are anticipating a slowdown of deals, lower revenues, cost-cutting measures, and maybe even bankruptcy. For companies struggling to stay afloat, opting for a merger or being acquired can be a viable option. As per PwC, companies that acquire during downturns can see benefits.
A robust contract management is critical to ensure a successful M&A strategy.
How to start with contracting for M&A
Here’s a checklist for M&A contracting strategy:
- Identify the clauses you need to search in the target business’ contracts. This could be risky clauses such as Force Majeure.
- Determine how efficiently you can search those clauses. If it’s stored digitally, then the clauses as well as the meta-data can be extracted automatically. However, if it’s stored on paper, then identifying the clauses will take a lot of time.
- Locate where the physical copies of the contracts are stored.
- Understand the frequency of M&A activities for your business. If it’s done often, then you have to prioritize your bandwidth and resources.
- Determine the cadence of reviewing existing contracts. Establish workflows and SOPs to review contracts timely and stay on top of obligations, renewals and expiry dates.
When fetching these details, the essence of contract lifecycle management software becomes apparent for support both pre and post-acquisition.
Contracting Pre-Acquisition
The role of AI-enabled CLM to facilitate pre-acquisition are:
Agility: Artificial Intelligence saves a lot of time by:
- Using existing clause library and pre-approved templates to draft contracts quickly
- Review contracts in a short span of time by extracting clauses and meta-data
- Fast-track contract approval with approval workflows and on-the-move approval with mobile app
Revenue forecasting: AI-enabled contracting software can pull details from contracts such as contract dollar amount, payment terms, spend utilization etc. This provides forward-looking teams with a good grasp on future cash flows.
Risk identification: AI-enabled CLM can identify risky clauses such as Force Majeure proactively. It can also determine the contract utilization for indexed vs non-indexed contracts.
Contracting Post-Acquisition
Short-term:
- Easily access all contracts by storing them in a single source. This will allow AI to extract meta-data and clauses easily.
- Identify all contracts that are expiring or auto-renewing in an acquired portfolio. AI has triggers and alerts in place to ensure you don’t miss out on important dates.
Long-term:
- Leverage post-award analytics to track the performance of your contract portfolio
- Collaborate closely with sales and procurement with a single source of truth
To know more on how AI-enabled CLM will help in your M&A journey, schedule a demo.
