Series 79 practice questionmediumDue Diligence
Why do acquirers review change-of-control provisions during legal diligence?
- AImportant contracts may terminate or require consent when ownership changes✓ Correct answer
- BTo calculate weighted average shares outstanding
- CTo classify cash as debt-like
- DTo estimate terminal growth rate
Explanation
Why A — Important contracts may terminate or require consent when ownership changes
Important contracts may terminate or require consent when ownership changes A valuable commercial contract can be lost if the counterparty has a consent right triggered by the transaction. That can directly reduce revenue visibility and alter purchase price negotiations.
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