Contract Management
"Success Fees" - anyone have experience with this? I have a consulting contract that involves the payment of a success fee if there is an M&A or "change of control" event occurring for the company I am serving. I am in the process of revising the language of this portion of the contract (with the support of the company) to remove any loopholes for an acquiring company to avoid or delaying payment. What I am looking for is any guidance on the mechanism or process to be used to ensure that I'll receive the pay out of the success fee by the acquiring company. Do any of you have experience with this? Has anyone used an escrow company to have a success fee be paid into an escrow account prior to closing and paid out upon closing?
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Answers
Entrepreneur. Ops Exec. Advisor. Angel Investor.
It's worth noting I'm not a lawyer (I advise you to check in with one) but have played a major role in 4 acquisitions.
I would have the contract read that your client pays the success fees, seems a bit odd to have the acquiring company pay the success fees. Let them negotiate with the acquiring company on covering it, but contractually have them responsible.
If the above is not an option make sure the assignment clause in you contract with your clients reads correctly.
That said keep in mind that a lot of acquisitions are not whole business entity acquisitions - meaning in a lot of cases it is really an asset sale. By only purchasing assets the acquiring company can protect itself from litigation and debts. If it is an asset purchase they may be able to get out of paying you - again this is why I would push for the success fees to be paid by your client.
Answered over 8 years ago