As contracts for technology products and services continue to grow longer and more complex, companies often face a familiar tension: closing deals quickly versus ensuring contract terms properly protect the business.
Many clients still hope for the elusive “one pager” that captures all key deal terms and requires little negotiation. After more than 30 years working in commercial contracting, I can say with confidence that those rarely exist. At the other extreme, contracts sometimes become overloaded with redundant language and unnecessary provisions, turning relatively simple deals into 50-100 page behemoths that unnecessarily slow deal cycles without adding meaningful business value. Procurement departments and customers in regulated industries—such as healthcare, insurance, and financial services—often add lengthy exhibits and numerous compliance-related provisions of dubious relevancy that can further extend negotiation timelines.
The reality, however, is that not every contract clause matters equally. For private technology companies providing products or services, a handful of provisions typically carry outsized importance—particularly when investors or acquirers later review contracts during due diligence in the context of an investment or acquisition.
This article focuses on the provisions that often affect how investors and acquirers value such a company — and therefore deserve the most attention during negotiation.
Why These Provisions Matter
Most private technology companies ultimately seek additional investments or an exit through acquisition (or IPO). When that moment comes, potential investors and acquirers conduct due diligence, reviewing the company’s material contracts to assess how stable and predictable future revenue really is.
What qualifies as “material” varies by company, but generally includes contracts that drive meaningful revenue or strategic value —for example, strategic development agreements, in-bound licensing arrangements, or critical distribution agreements. Contracts that are not material to operations or revenue may not justify prolonged negotiation over issues such as assignability or termination rights (but such issues should be tracked for compliance nonetheless).
Once contracts are vetted for materiality, diligence typically focuses on 2 core questions:
- Will the agreement —and the revenue it generates—continue after an acquisition or change of control?
- Are there any provisions that could be expected to reduce the company’s value?
Because acquisition and investment offers are often based on revenue or profit multiples, provisions that undermine contract or revenue stability can directly reduce valuation. Buyers may therefore discount—or exclude entirely from valuation calculations—contracts that:
- Can be easily terminated (e.g., for convenience or upon change of control)
- Cannot be assigned
- Impose exclusivity obligations restricting future business opportunities
- Limit future commercialization or use of IP
- Create uncertainty around future revenue, or
- Attach unmanageable risk to the provider
With this context in mind, below are the issues in potential acquisition target company operational tech deals¹ that have the potential for the greatest business consequences and, therefore, deserve careful negotiation from the outset.
Contract Provisions that Matter Most
When advising technology providers, there are typically 6 key areas² that warrant particular attention:
1. Termination for Convenience
What this means
A customer may terminate the contract at any time, for any reason. In some cases, the customer may also be entitled to a refund of prepaid, unused service fees or cancellation of future payment obligations, such as in multi-year deals or where payments are not made annually up-front, in full.
Why this matters:
When customers can terminate freely—especially where refunds or unpaid future commitments are involved—it introduces revenue uncertainty. Potential investors and buyers may discount or exclude such contracts when evaluating future revenue streams.
Even outside an investment or acquisition context, termination-for-convenience rights that require refunds or void future payments undermine revenue predictability and may likely impact revenue recognition of the provider. If there is one issue business and legal teams most often align from the provider’s side, and try to push back against, this is it.
2. Assignability and Change-of-Control Rights
What this means
A customer may terminate the agreement if the provider undergoes a change of control (e.g. an acquisition or sale of all or substantially all equity or assets) or sometimes even effectively block the transaction entirely. In cases where assignment of the contract requires customer consent, the structure creates significant leverage on the customer’s side which can result in renegotiated terms or even termination.
Why this matters
If customers can terminate or block assignment following a change of control, buyers/investors may be unwilling to count the deal toward guaranteed revenue because it may force them into a renegotiation at less favorable terms or even risk that the deal goes away completely.
Where assignment rights cannot be fully secured by the provider, common compromises include qualifying the customer’s approval right with a requirement that consent not be unreasonably withheld or delayed or limiting termination rights to assignments involving the customer’s competitors.
Even imperfect solutions are preferable to outright prohibitions and may help assuage any concerns from a later potential buyer/investor. Contracts that are silent on assignment often present less risk than those expressly prohibiting assignment or permitting termination upon change of control.
3. Most Favored Nation (MFN) and Preferred Pricing Clauses
What this means
Most Favored Nation (MFN) clauses require providers to offer customers pricing or economic terms at least as favorable as those offered to other customers for like services or products. These provisions are often coupled with audit rights to support enforcement.
Why this matters
MFNs can constrain pricing flexibility and worsen future deal economics. They are often difficult to measure given the various value inputs in each contract. Prospective buyers often view these provisions negatively because they can limit revenue growth or create downward pricing pressure, which can affect the perceived value of the contract.
4. Intellectual Property-Related Provisions
What this means
Customers sometimes insist on using their own contract templates which may contain IP-related provisions ill-suited for various technology provider agreements such as licensing or SaaS agreements, especially when technology offerings are placed inside larger services agreements. For example, a work-for-hire clause may be standard for limited custom work but grants IP rights to the customer for work product developed by the provider in the course of providing services. This and other broad assignment clauses may unintentionally transfer ownership of technology or other technology improvements to the customer.
Why this matters
These provisions may inadvertently restrict or assign the provider’s core IP rights. In extreme cases, valuable IP rights may be transferred unintentionally, undermining company value if a potential buyer perceives IP ownership as restricted or forfeited.
5. Exclusivity and Related Limitations
What this means
Exclusivity clauses expressly limit the provider’s ability to serve other customers. Related provisions — such as rights of first refusal and no-shop rights—may restrict future transaction opportunities.
Why this matters
Such provisions reduce operational flexibility and revenue potential. Buyers may hesitate to pursue acquisitions where third parties hold preferential rights or where growth opportunities are constrained.
6. Unusual Allocations of Risk
What this means
Risk allocation provisions —including indemnities, warranties, and liability limitations—sometimes impose disproportionate risk on the provider.
Why this matters:
Many investors and buyers review contracts for unusual or unmanageable risks. While negotiation strategies and contract terms will vary, it is important to understand how the contract allocates risk, ensuring it is manageable, reasonable and generally consistent within the bounds of industry practice.
Final Takeaways
While not exhaustive, the issues above represent the contract provisions most frequently scrutinized during due diligence of key contracts for private technology providers in the context of a possible acquisition or investment. Because they can materially and directly affect valuation — and in some cases can torpedo a possible deal when not done correctly — getting these terms right in the normal course of drafting and negotiating can help to avoid possible pitfalls in terms of valuation discounts or other difficult renegotiations in the future with possible investors or acquirers.
Ted Stern is a Partner at OGC and leads the firm’s Technology Transactions & Digital Media practice group. He focuses on complex commercial transactions across digital media (content, podcasting, adtech), technology (including SaaS), e-commerce, and professional services. In 2025, he was recently named one of the Top 25 Media and Entertainment Attorneys (nationwide) by Attorney Intel.
1 While this article focuses on operational contracts, it is important to note that other core contracts—such as employee agreements, IP assignment documents, vendor arrangements, and corporate governance materials—are also reviewed during due diligence to help identify potential liabilities or operational risks.
2 This list does not represent an exhaustive list of all key issues in a contract. These are simply the most common issues that, over the years, I have found buyers/investors will examine most carefully in evaluating material, revenue-generating contracts. A lawyer should always review the entire agreement to look for non-standard or otherwise disadvantageous terms.