Identify Issues In Portfolio Company Contracts

---
name: identify-issues-in-portfolio-company-contracts
task_id: corporate-ma/identify-issues-in-portfolio-company-contracts
description: Guides preparation of a due diligence issue memo for a portfolio company contract review where a large, heterogeneous contract set must be systematically assessed for material risks across multiple categories.
activates_for: [planner, solver, checker]
---

# Skill: Portfolio Company Contract Diligence Issue Identification

## 2. Failure modes the skill is correcting

- The review summarizes each contract's commercial terms without identifying the specific provisions that create material legal or operational risk for the acquisition.
- Change-of-control and assignment provisions are reviewed in each contract but their collective deal-closing implications are not synthesized into an actionable risk assessment.
- Employment agreements are reviewed for standard terms without specifically assessing change-of-control benefits, severance triggers, and restrictive-covenant enforceability as deal costs and post-acquisition operational constraints.
- Environmental remediation contracts are treated as ordinary commercial contracts without assessing the regulatory compliance and liability allocation implications.
- Findings stop at issue spotting and do not convert each issue into a diligence conclusion with scale, interaction, consequence, and next-step recommendation.
- The memo lists concerns informally without using a consistent severity framework, making it hard to prioritize closing, disclosure, and integration work.
- The review reads contract-by-contract but fails to reconcile the contract set against the transaction summary and the index of documents, leaving gaps in coverage or missing documents unnoticed.

## 3. Legal frameworks / domain conventions that apply

- Portfolio company contract diligence is a transactional risk exercise: identify material legal, commercial, and operational risks in the target's contract portfolio that may affect signing, closing, post-closing integration, or valuation.
- Core diligence categories include change-of-control and assignment restrictions, consent rights, termination triggers, exclusivity and non-compete obligations, pricing or volume commitments, indemnities and liability caps, IP ownership and license limits, regulatory compliance covenants, and transfer restrictions.
- Employment agreements must be reviewed for severance, bonus, acceleration, retention, restrictive covenants, and any change-of-control payment or vesting triggers that may create closing cost or integration friction.
- Real estate leases must be reviewed for landlord consent, assignment restrictions, change-of-control provisions, renewal or purchase rights, and any default or recapture risk triggered by the transaction.
- Master services, supply, and distribution agreements must be reviewed for exclusivity, minimum purchase or service commitments, service-level exposure, price adjustment mechanics, and change-of-control termination rights.
- Environmental remediation and similar regulatory-driven contracts must be assessed for site-specific liability allocation, agency approval, transfer conditions, ongoing reporting duties, and indemnity scope.
- The governing legal proposition for each issue should be tied to the controlling contractual language or applicable authority identified in the source set; do not state a conclusion without naming the clause, document, or rule that supports it.
- If the source documents identify a statutory or regulatory hook, use that authority as the anchor; otherwise cite the generally recognized contract, employment, property, or regulatory principle that governs the point.

## 4. Analytical scaffolds

- Start with the transaction summary memo: identify deal structure, closing conditions, any risk themes flagged by the deal team, and any special assumptions that affect contract review.
- Build a complete contract inventory from the index or schedule before analyzing substance; if the source set covers multiple categories or counterparties, enumerate them first and then analyze each category in turn.
- For each contract, extract the operative risk facts, then test them against the diligence categories above.
- For each identified issue, complete the full triad: tie the concern to a source-documented scale or threshold, cross-reference the interacting clause or document, and state the downstream consequence for the client.
- Translate description into diligence judgment: explain whether the issue is a consent problem, closing delay risk, post-closing operating constraint, cost item, litigation exposure, disclosure item, or integration issue.
- Where multiple contracts address the same business relationship or topic, compare them for internal consistency and flag mismatches in consent rights, liability allocation, pricing, term, or termination mechanics.
- Reconcile the contract set with the transaction summary and the data room index; note contracts referenced in the index but missing from review, and note provisions that appear material only when read across documents.
- Keep the analysis issue-oriented rather than contract-summative; the deliverable should explain why each provision matters to the transaction, not merely what the provision says.
- Use a consistent ordinal severity scale defined once at the top of the memo, and apply it uniformly to each issue based on closing risk, financial exposure, operational disruption, or regulatory sensitivity.

## 5. Vertical / structural / temporal relationships

- Distinguish pre-closing issues from post-closing operating constraints.
- Distinguish entity-level consent needs from counterparty-by-counterparty consent needs.
- Distinguish one-time closing costs from ongoing contractual burdens.
- Distinguish document-level risks from portfolio-level patterns that recur across multiple agreements.
- Distinguish an issue affecting signing or closing from one that primarily affects integration, workforce management, or future expansion.
- Where the source documents contain multiple counterparties, multiple sites, or multiple agreement types, analyze them as separate items rather than collapsing them into a single representative discussion.

## 6. Output structure conventions

- Single deliverable: a due diligence issue memorandum saved as `due-diligence-issue-memo.docx`.
- Use a conventional issues-memo format: brief executive overview, then issue-by-issue analysis grouped by contract category or risk theme, then a concise recommendations section.
- At the top of the memo, define the severity scale once, using ordinal labels such as Critical, High, Medium, and Low.
- For each issue, include: contract identification, severity, a short issue statement, the source-documented scale or threshold, the interacting clause or document, the transaction consequence, and a practical recommendation.
- Write recommendations in imperative form and tie them to the relevant business owner, counsel, or officer, with a timing anchor that tracks the transaction milestone or any deadline in the source documents.
- If the review surfaces a missing document, an unreviewed referenced contract, or an apparent coverage gap, list it as a separate issue rather than burying it in a narrative footnote.
- End with a concise Recommended Actions section that prioritizes immediate diligence follow-up, consent outreach, disclosure cleanup, and integration planning.