Danielle Fortier, partner at Cooley, has closed four corporate carve-outs this year, while most M&A lawyers have been lucky to see one. So, what blows up the timeline and budget almost every time? The vendor contracts nobody mapped out before the LOI.
In this episode, Danielle walks through why vendor relationships (the boring back-office stuff like cloud hosting and finance systems) are the piece buyers most often underprice. She also explains why she pushes clients to set TSA pricing and duration expectations before signing, rather than discovering a three-month-versus-eighteen-month gap mid-negotiation. And you don't want to miss her breakdown of why the biggest mistake isn't a missed contract; it's leaning on the TSA as a catch-all fix instead of standing up independent operations as fast as possible.
She closes with why AI has made source code a lot less sensitive to disentangle than it used to be, and a story about a carve-out that was still finding fifty missing vendors days before closing.
What you'll learn
Map vendor entanglement before the LOI, not after. Cloud hosting, finance systems, and IT security are usually shared across the whole seller organization, and they're the hardest pieces to pull apart cleanly.
Set TSA duration and pricing expectations at the LOI stage. A seller assuming three months and a buyer assuming eighteen is a gap that derails negotiations if it surfaces late.
Don't treat the TSA as a catch-all fix. Every gap that defaults to the TSA schedule creates a dependency on the seller's team months after closing, so build independent vendor relationships wherever you can instead.
Identify employee gaps two to three months before closing, not the week before. Early identification gives the buyer time to hire or reshuffle internally instead of scrambling under a TSA.
Drop the materiality threshold on carve-out diligence. A sub-$200,000 software license can still be the thing that breaks day-one operations, even if it would never show up on a standalone deal's materiality radar.
Price in roughly 2x the legal spend of a standalone deal. Carve-outs require far more contract-by-contract untangling, and clients are often surprised by the delta.
Treat AI's effect on code sensitivity as a genuine shift. Source code disentanglement has gotten easier because fewer sellers treat it as their core IP anymore.
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