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Contract Considerations for Private Equity-Backed Companies: Aligning Contract Terms With Unique Business Operations

Recording of a 90-minute CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, October 24, 2023

Recorded event now available

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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.


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.



  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


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?


Goeschel, David
David Goeschel

Koley Jessen

As the leader of the firm’s Commercial and Technology Agreement practice, Mr. Goeschel has “a seat at the...  |  Read More

Horgan, Jack
Jack Horgan

Koley Jessen

With a focus on representing middle-market technology companies in connection with their commercial endeavors, Mr....  |  Read More

Oxley, Eric
Eric B. Oxley

Shareholder and M&A Practice Chair
Koley Jessen

Mr. Oxley counsels business owners, corporate, and private equity clients in domestic and international mergers,...  |  Read More

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