DealLawyers.com Blog

Divisive transactions like spin-offs and carve-outs often require the parties to address the post-closing use of shared technologies. This WilmerHale podcast offers some guidance on that topic.  In this excerpt from the transcript, WilmerHale’s Stephen Gillespie discusses the major challenges that shared technologies present for transaction planners:

I think there’s really two key challenges in identifying and mitigating the risk of shared technology in any divestiture. And those are scale and knowledge gaps. So big companies might have hundreds or even thousands of vendor agreements and inbound licenses related to shared technology. And the people who know the details of those license agreements in IT and human resources and finance, those people with knowledge are often siloed in their particular function. And sometimes the business being sold doesn’t even know that a sale is coming. So you can’t consult with them early in the process.

Stephen goes on to say that in order to appropriately address shared technology issues, dealmakers need to build a cross-functional team early on in the process to identify the intellectual property shared by the companies involved in the spin-off or carve-out. All of the relevant contracts then need to be reviewed for divestiture clauses, restrictions on assignment and change-of-control provisions in order to determine the rights the parties have and what post-closing licensing arrangements will be necessary.

– John Jenkins