TL;DR Laura Frederick, Jonathan Perkel, and Mike Dockery explored how the provisions we negotiate in commercial contracts every day create real consequences when a company goes through an acquisition. They covered why assignment and change of control language is not boilerplate, how exclusivity and most favored nation clauses can destroy deal value, what buyers actually look for in indemnification and limitation of liability provisions, why termination for convenience creates transfer risk even without a change of control trigger, and practical steps contract teams can take now to prepare their portfolios for future diligence.
Most commercial lawyers spend their days focused on bilateral risk between two parties. We negotiate indemnity caps, fight over assignment language, and push back on exclusivity requests. But we rarely think about what happens to those provisions when a third party shows up to buy the company. That blind spot was the focus of a How to Contract webinar hosted by Laura Frederick and featuring Jonathan Perkel, Chief Legal Officer at Esusu with nearly 25 years as a General Counsel across five companies, and Mike Dockery, an in-house attorney at Marveri who spent much of his career as an M&A lawyer at Sherman & Sterling and Morrison Foerster. The panel brought together the M&A perspective and the commercial contracting perspective to help us understand where our daily work creates long-term consequences.
How Buyer’s Counsel Actually Looks at Your Contracts
Before diving into specific provisions, it helps to understand what buyer's counsel is actually doing when they open your contract files. It is not a line-by-line legal review of every term. It is a risk sorting exercise.
Mike described three buckets that every contract gets sorted into. First, will this contract survive the deal? That is the transfer risk question. Second, will this contract create post-closing restrictions on the combined business or the buyer's existing business? That covers exclusivity, non-competes, and MFN clauses. Third, are we taking on liabilities that survive the deal? That covers indemnification and uncapped exposure.
The process starts mechanically. Buyer's counsel creates a matrix tracking where the problem provisions sit across the entire contract portfolio. With AI, that review now goes much deeper than it used to. Once the universe of issues is mapped, the M&A team decides what to do about each one. The tools range from simply putting it on the disclosure schedules to specific reps and warranties, specific indemnities, escrow holdbacks, or purchase price reductions. Reps and warranties insurance adds another layer, because underwriters will try to get exclusions for the same issues buyer's counsel is flagging.
The takeaway for us is straightforward. Every contract we sign is potentially going to be reviewed down the road. You want to have a rationale for the risk you took in each one.
Strategy #1 – Stop Treating Assignment and Change of Control as Boilerplate
This is probably the provision we spend the least time on relative to its importance. It sits in the general provisions at the back of the agreement, and it tends to get glossed over. That can be a problem.
Jonathan started with governing law, which matters more here than most lawyers realize. What "assignment" means under New York law is different from what it means under Delaware law. In New York, assignment would generally cover a merger where the target does not survive and probably an asset sale of all or substantially all the business. It probably would not cover a change in majority ownership, and it probably would not cover a reverse triangular merger where the target is the surviving company. Those distinctions matter enormously in an M&A context. Agreeing to a random state's governing law without understanding how it affects your assignment provision is a risk most commercial lawyers do not think about.
Jonathan's drafting hierarchy is worth following. Best case, get free assignment in connection with M&A transactions built into your standard form. If you do not ask for it, you will not get it. If you cannot get that, try to limit the consent requirement to assignments to direct competitors, with a post-acquisition termination right instead of a consent requirement. If you have to give a consent right, time-fence it. Give the counterparty 30 days to decide, but do not let it hang open for the rest of the term. And always include the "not unreasonably withheld, withdrawn, conditioned, or delayed" language.
Jonathan also flagged an important drafting detail. Some contracts say any purported assignment in violation of the provision is "void ab initio" or "null and void." That means the assignment did not happen. Without that language, the assignment goes through, but the counterparty may have a contract claim for damages. That is a very significant difference from an M&A perspective.
Mike added the buyer's counsel perspective. There is also a confidentiality problem. The transaction is typically confidential, and you do not want the acquirer approaching your largest customers to ask for consent before the deal is certain. That can prevent a simultaneous signing and closing, which introduces its own risks.
Mike also noted that deal structure is almost always dictated by tax considerations, not contract considerations. If your contract issues are more economically impactful than your tax issues, you have a very serious problem in your contracts.
Strategy #2 – Understand Why Exclusivity, Non-Competes, and MFN Clauses Destroy Deal Value
Jonathan's advice on this category was blunt. Do not give them. Receive them. But do not give them.
The danger is that these provisions feel manageable in the moment. A large financial institution asks for a right of first refusal over anything in the financial services industry for the next three years. They throw it in like it is nothing. But an acquirer who plans to expand your business into those areas will see that you can only go to one bank and wonder why you agreed to it. That right of first refusal just reduced the perceived value of the contract and potentially the deal.
Jonathan's fallback hierarchy for these provisions is practical. If someone insists on a right of something, try to make it a right of first offer instead of a right of first refusal. A right of first offer means you go to them first and let them make a pitch, but you can still shop. That is a much less restrictive commitment.
Most favored nation clauses deserve special caution. Mike explained why buyers do not like them. An MFN that leaks to affiliates means the buyer is inheriting a restriction on their own business. By definition, none of the buyer's existing commercial contracts were entered into with that MFN in mind. If the MFN has a look-back provision, the buyer may need to review every one of their existing agreements to check whether they are in breach on day one of closing.
Mike's advice on MFN provisions was to dig into the specifics. What are the triggers? Is it a look-back or only forward-looking? Does it cover specific products or everything? Is the comparison pricing only, or all terms? And the critical question. Does it cover affiliates, and how is "affiliate" defined? The affiliate leakage is the biggest concern in an M&A context, and it is very hard to carve out explicitly because the counterparty will resist that kind of flexibility.
Laura raised an important process point for commercial contracts lawyers who work in a legal department. Exclusivity, MFN, and non-compete decisions should be escalated. These are not decisions a director or manager should be making. They may be General Counsel or CEO-level calls, because the risk they carry is disproportionate to how they appear in the contract.
Strategy #3 – Think About Indemnification and Liability Caps from the Buyer’s Perspective
We negotiate limitation of liability and indemnification provisions in every deal. But we usually think about them as bilateral risk allocation between us and our counterparty. The M&A lens is different. A buyer is asking how much uncapped or poorly capped liability am I inheriting across this entire portfolio.
Jonathan walked through how these provisions get scrutinized. The standard SaaS limitation of liability caps direct damages at 12 months of fees, with carve-outs for indemnification obligations, confidentiality breaches, IP theft, and payment provisions. Each carve-out represents potential liability in excess of the cap. Buyer's counsel will count those carve-outs and assess whether they are mutual and whether they make sense in context.
The biggest concern is what is uncapped. Jonathan flagged data breach liability as a growing pressure point. Many counterparties now ask for uncapped liability for data breaches, period, with no fault requirement. That makes you look like an insurance company. If the liability is not tied to your specific conduct or some negligence standard, it is hard to quantify. And hard to quantify is exactly what buyer's counsel does not want to see.
Strategy #4 – Recognize That Termination for Convenience Is a Transfer Risk
This one is easy to miss. You can draft the most carefully constructed assignment provision in the world, and it will not matter if the counterparty can just terminate for convenience and walk away.
Mike made this point clearly. If the counterparty can terminate on 30 days' notice, there is no ongoing value to that contract. All the transfer risk analysis becomes irrelevant because the counterparty can decide they do not like who you sold to and just leave. The revenue is not stable. Quality of earnings gets discounted. Every dollar under a contract with a short-term termination for convenience clause carries less weight.
Jonathan made a similar point earlier in the webinar. Contracts with 30-day outs are simply worth less to an acquirer. Three-year contracts that cannot be terminated without an uncured breach are looked at as more valuable. Accepting a 30-day termination for convenience clause to close a deal quickly may feel like the right trade in the moment, but it directly affects how that contract gets valued if the company is acquired.
Mike also flagged a logistical issue with renewals during a transaction. If there is a gap between signing and closing, and a renewal window opens during that gap, the contract team has to coordinate with the buyer's internal team on whether to renew or let it lapse. That creates extra work and potential deal complications. Building in more time for those logistics if a transaction is on the horizon is worth the effort.
Strategy #5 – Prepare Your Portfolio Before Diligence Starts
Both speakers agreed on this. You do not want to find out about your own problems at the same time buyer's counsel does.
Jonathan's advice started with organization. Do you have a CLM or other system that lets you find provisions quickly? Can you identify which contracts have 30-day outs, exclusivity, or MFN clauses without reading every agreement? If your contracts are scattered across a shared drive with no way to parse them, the diligence process is going to take longer and create more red flags. He also recommended tracking how each deal differs from your standard terms. At his current company, they use a special terms provision in the order form that identifies exactly what changed from the online terms. That way, anyone can look at the order form and see the deviations without reading the full contract.
For contracts that have been amended multiple times, Jonathan suggested building a consolidated version that incorporates all amendments into one document. You may not share it with buyer's counsel, but at least you know what the deal actually says today without reconstructing it from scratch two years after Amendment 10. AI tools can help with this work.
Mike took a different angle on cleanup. He cautioned against calling every counterparty to renegotiate problem provisions. That burns political capital and sends signals you do not want to send. Instead, rank your problem contracts by risk and wait for natural opportunities. When a renewal comes up, make sure whoever handles it knows about the issue and tries to address it in a natural way. You can frame it as a form update rather than a renegotiation.
For contracts you simply cannot fix, document the rationale. Why did you agree to the provision? What were the negotiation dynamics? What does the MFN actually mean for the business? That documentation is valuable in diligence because it shows the buyer that you understand the risk and have thought through the implications. Mike emphasized that knowing the original negotiation dynamics helps enormously when you do eventually have to strategize around a consent or a problematic provision.
Laura added that operational workarounds can also reduce the real-world impact of a bad provision. If you have terrible confidentiality terms, limit the information you share. If you have problematic IP terms, do not have the counterparty create any IP. Having that kind of operational mitigation documented shows a buyer that the risk on paper is not the same as the risk in practice.
Top 10 Takeaways for Commercial Contract Lawyers
Here are the top 10 takeaways from this webinar.
Every contract you sign may be reviewed in diligence someday. Buyer's counsel sorts every commercial contract into three buckets. Will it survive the deal? Will it restrict the combined business? Does it carry surviving liabilities? We negotiate our contracts thinking about bilateral risk with our counterparty. M&A counsel thinks about the entire portfolio. Having a rationale for the risk you accepted in each contract matters more than getting every provision perfect.
Assignment and change of control provisions are not boilerplate. What "assignment" means depends on governing law, and the differences are significant. A reverse triangular merger may or may not be covered depending on the jurisdiction. If you are agreeing to a state's governing law without understanding how it interprets assignment, you are taking a risk you may not have priced. Build free assignment in connection with M&A into your standard forms. If you do not ask, you will not get it.
"Void ab initio" language in assignment provisions changes the analysis. If the provision says a purported assignment in violation is void, it means the assignment did not happen. Without that language, the assignment goes through but the counterparty has a damages claim. That distinction matters enormously in a deal context. Pay attention to it when you are on the drafting end and when you are reviewing counterparty paper.
Do not grant exclusivity, rights of first refusal, or MFN clauses unless you have to. These provisions feel manageable when we sign them. They are not. An acquirer planning to expand your business into new areas will see your right of first refusal with a major customer as a cap on the deal's upside. If you must give a right of something, push for a right of first offer instead of a right of first refusal. The difference is significant. A right of first offer lets you shop. A right of first refusal locks you in.
MFN clauses with affiliate leakage are especially dangerous. If an MFN clause applies across affiliate thresholds, the buyer inherits a restriction on their own existing business. None of the buyer's contracts were entered into with your MFN in mind. A look-back MFN could put the buyer in breach on day one. If you must accept an MFN, dig into the triggers, the comparison scope, and especially the affiliate definition. That is where the real risk sits.
Uncapped indemnification liability is hard to quantify, and buyers do not like what they cannot quantify. Every carve-out to your limitation of liability cap represents potential exposure above the cap. Buyer's counsel will count those carve-outs. Uncapped data breach liability with no fault requirement is a growing pressure point. It effectively makes you an insurance company. If the liability is not tied to your conduct or a negligence standard, it is hard to put a number on, which is exactly what creates problems in diligence.
Termination for convenience is a transfer risk, even without a change of control trigger. You can draft a perfectly clean assignment provision and it will not matter if the counterparty can walk away on 30 days' notice. The revenue is not stable. Contracts with short-term convenience termination get risk-discounted by buyers. Long-term contracts with termination only for uncured breach are worth more. Accepting a 30-day out to close a deal quickly has consequences you may not see until years later.
Escalate exclusivity, MFN, and non-compete decisions to the right level. These provisions carry disproportionate risk relative to how they appear in the contract. A sales rep or even a VP may not be the right person to make the call on whether to grant exclusivity. These may be General Counsel or CEO-level decisions. Make sure your playbook routes them appropriately. If you are the most senior lawyer, make sure you are the one deciding.
Do not shoot yourself in the foot with your own forms. Mike told a story from early in his career about a target company whose standard commercial template had a problematic assignment provision. No single contract would have been a problem by itself. But because every contract had the same issue, it became a systematic deal risk. Every dollar at the company was subject to transfer risk because of their own form. Review your templates and playbooks now. Make sure that if you get your standard terms, you are okay.
Document the rationale for the risks you take. Some provisions you simply cannot renegotiate. The counterparty will not budge, and you do not have the leverage. In those cases, document why you agreed to the provision, what the negotiation dynamics were, and what the business impact is. That documentation is valuable in diligence because it shows the buyer you understood the risk. Operational mitigation counts too. If you limit the information you share under a bad confidentiality provision, document that practice. It shows the risk on paper is not the same as the risk in practice.
What These Insights Mean for Your Contracts
Here are five practical steps you can take with your contract portfolio today.
Audit your standard forms for M&A readiness. Pull your template and check whether it includes free assignment in connection with M&A transactions. Check the assignment provision, the change of control language, the governing law, and the termination for convenience terms. If your own form creates systematic risk across every deal, fix it now.
Add exclusivity, MFN, and non-compete provisions to your playbook escalation path. Make sure your playbook routes these decisions to the right person. They should not be approved by a sales rep or a junior lawyer without senior review. Flag them as disproportionate-risk provisions that require General Counsel or executive approval.
Build a risk inventory of your existing contracts. Use your CLM or AI tools to identify which contracts have 30-day termination for convenience, exclusivity grants, MFN clauses, uncapped liability, or problematic assignment language. Rank them by risk. You do not want to discover these issues at the same time buyer's counsel does.
Address problem contracts at natural renewal points. Do not call every counterparty to renegotiate. That burns political capital and sends signals. Instead, flag problem contracts for remediation at their next renewal and make sure whoever handles the renewal knows the issue. Frame it as a form update, not a renegotiation.
Document what you cannot fix. For contracts with provisions you cannot renegotiate, document the rationale, the negotiation dynamics, and any operational mitigation you have put in place. That documentation will be valuable in diligence. It turns an unknown risk into a known, managed one.
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