Weak Contracts Create Post-Close Operational Risk

Most buyers don’t realize how weak the target company’s contracts are until after LOI. A surprising number of lower middle market businesses operate on: * unsigned agreements * outdated templates * poorly documented email modifications * customer relationships that evolved beyond the scope of the written contract Even where properly executed agreements exist, many: * prohibit assignment without consent * contain vague indemnification language * lack meaningful limitation-of-liability protections * fail to clearly address payment mechanics or dispute procedures Weak contracts can slow financing and delay closing, but the bigger issue is usually operational. One issue that shows up frequently in ETA deals involves the transferability of key customer contracts. Buyers often assume those relationships move with the business automatically. In many cases, they do not. Certain agreements require: * counterparty consent * advance notice * financial disclosures * renegotiation before assignment That can delay closing or create immediate customer risk post-close. The diligence process is not just about validating financial performance. Buyers also need to assess which contractual issues may create operational friction, revenue disruption, or legal exposure after closing. If you are in an active deal and want to better understand the target company’s contracts, or if you recently closed and want to clean up legacy agreements, the below link provides an overview of common contract issues. https://www.linkedin.com/pulse/avoiding-common-contract-pitfalls-legal-landmines-wendaur-iv-esq--0hzee