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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Commercial Law

Date & Time
  • event Date

    Tuesday, October 24, 2023

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$297.00
CLE
ALL

This CLE webinar will discuss the important commercial contract considerations a business must consider after receiving an investment from a private equity firm. The panel will address the special considerations for private equity-backed portfolio company (PortCo) commercial contracts, including issues that will impact the PortCo's current business operations, the organic growth of the PortCo, the growth of the PortCo via add-on acquisitions, and the value of the PortCo at exit.

Faculty

David Goeschel
Shareholder
Koley Jessen PC LLO

As the leader of the firm’s Commercial and Technology Agreement practice, Mr. Goeschel has “a seat at the table” for his clients’ strategic relationship discussions and contract negotiations. He has spent his entire career helping businesses increase their value through commercializing their IP, and exclusively focuses his practice on getting deals done through structuring, negotiating and implementing complex commercial contractual arrangements. Mr. Goeschel has extensive experience structuring and negotiating a wide range of commercial contracts, including manufacturing, distribution, supply, licensing, consulting, and other contractual arrangements throughout the supply chain and procurement process. His background in IP allows him to be a strategic advisor to technology clients, with a particular focus on technology transactions and vast experience drafting and negotiating software license, development, and SaaS agreements.

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Jack Horgan
Shareholder
Koley Jessen PC LLO

With a focus on representing middle-market technology companies in connection with their commercial endeavors, Mr. Horgan counsels clients on both the provider-side and the procurement-side of software, technology, and IP commercial transactions. He routinely handles transactions involving: software licensing, software distribution, software development, SaaS, PaaS, IaaS, cloud computing, outsourcing, ERP solutions, IoT, co-location arrangements, database licensing, artificial intelligence, NFTs, blockchain, mobile applications, patent and technology licensing, joint development arrangements, and IT professional services.

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Eric B. Oxley
Shareholder and M&A Practice Chair
Koley Jessen PC LLO

Mr. Oxley counsels business owners, corporate, and private equity clients in domestic and international mergers, acquisitions and divestitures, as well as corporate and general business matters. He has executed more than 200 domestic and cross-border M&A transactions in a wide variety of industries, including a heavy volume of deals in the technology, insurance, industrial, and specialty distribution sectors. 

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Description

A business may experience significant change when it receives an investment from a private equity firm and it becomes a PortCo. For example, the private equity firm may have a structured plan to implement changes with goals to increase revenue, improve gross margins, reduce overhead, and leverage shared services with other PortCos. As part of the plan, the PortCo's leadership will also want to review the PortCo's customer contracts to ensure they are consistent with the private equity firm's and PortCo's financial objectives and metrics.

A PortCo should rarely, if ever, agree to most favored nation (MFN) pricing terms in a customer contract. Generally, these provisions promise the customer that they will not pay a higher price for goods or services than the lowest price charged to any other customer for the same goods or services. With accelerated organic growth, the PortCo is at greater risk of violating an MFN provision with an additional volume of customer contracts. Also, the PortCo may inadvertently breach an MFN provision if it assumes an add-on acquisition because those contracts may contain lower prices than the PortCo's existing contracts. Finally, at the time of exit, an MFN provision may create concerns for a strategic acquirer with a similar customer base as the PortCo.

Intellectual property rights and licensing are other areas where PortCos need to pay close attention to their rights and obligations. These terms must be analyzed not only from the perspective of the PortCo's current operations but also future operations and the impact on future acquirers. Intellectual property ownership and licensing terms must be narrowly tailored for the specific use case to ensure the PortCo is not "leaving revenue on the table" for future, distinct use cases.

Other contract provisions that must be heavily scrutinized by the PortCo include termination rights, assignment and change of control restrictions, restrictive covenants and exclusivity, and affiliate rights and restrictions. These terms can potentially undermine the value of the commercial contract and place the PortCo at risk for a potential breach based on the PortCo's growth potential and current and future business operations.

Listen as our authoritative panel discusses the unique business characteristics that PortCos need to consider when reviewing commercial contracts. The panel will also provide contract negotiating and drafting tips to employ when representing a PortCo.

Outline

  1. Overview of the unique characteristics of a PortCo that must be considered when reviewing commercial contracts
    1. PortCo's current business operations
    2. Organic growth of the PortCo
    3. Growth of the PortCo via add-on acquisitions
    4. Value of the PortCo at exit
  2. Basic commercial terms of customer contracts
  3. MFN pricing terms
  4. Termination rights
  5. Ownership of intellectual property rights
  6. Licensing intellectual property rights
  7. Assignment and change of control
  8. Restrictive covenants and exclusivity
  9. Affiliate rights and restrictions
  10. Key takeaways and practical considerations

Benefits

The panel will review these and other key issues:

  • What are the unique aspects of a PortCo that require special consideration when reviewing and negotiating commercial contracts?
  • What terms in customer contracts need to be scrutinized when a business becomes a PortCo?
  • What are the implications on intellectual property rights when a business becomes a PortCo?
  • What are other issues and concerns a PortCo should be aware of when entering into new contracts or maintaining existing contracts?