Asset Purchase Transfer of contracts for Professional Services/E-learning

November 30, 2021

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

Good Morning Searchfund community, I am in the midst of acquiring a Professional and Management Development Education Training e-learning company by end of the year and am hoping to hear thoughts from operators and/or attorneys and/or investors around tips for having conversations with large corporations around signing new contracts (this is an Asset Purchase). My sellers are very uncomfortable with how that conversation will go, who to have that conversation within these organizations (procurement team?) and I want to hear from experiences on what to do and also what not to do to have this move as smoothly as possible.
Thank you everyone!

AK

Reply by a professional
from Dartmouth College in Los Angeles, CA, USA

Hi Alisa, this is a very common issue in asset deals. I would first decide which of these agreements you absolutely need, then you would negotiate with the seller to have either the consent of the third party to the assignment of the existing contract (much easier) or agreement on a new contract as a requirement for closing. Often times the agreement itself will have a notice provision with contact info, which may give you an idea of who you can contact at the corporation. It's preferable for the seller to initiate the conversation, since they should already have an existing relationship with the third party. Timing should be relatively close to closing so the seller feels more solid about the deal overall. The seller will always try and minimize the number of consents or novations required, but if they are important contracts you need to have written confirmation that the assignment won't lead to termination, so you have to emphasize that certain assignments are closing conditions as early as possible in the deal.

Reply by a searcher
from Pennsylvania State University in Philadelphia, PA, USA

Thanks for sharing more insight on this.

+4 more replies.

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