Risk arbitrageurs love the possibility that an enterprise or a service provider might change owners. The “arbs” trade on perceived differences in value of the enterprise before and after the change of control.
Executives and managers responsible for business process management and supply chain management don’t love such change. Enterprise managers need to adapt the sizing and pricing of their outsourcing transactions to include possible mergers, acquisitions, divestitures and restructuring activity within the term of the outsourcing agreement. Service providers need to provide assurances that a change of control, such as in a merger or restructuring, will not impair the competitive position of the enterprise customers.
Accordingly, “M&A risk” should be identified by both parties in order to evaluate and negotiate appropriate contract provisions to manage and mitigate the impact of major changes in ownership or capital structure.