Anatomy of a Creative Deal Structure

Senior associate Adam Cummins offers expert advice in this byline article about creative outsourcing deal structures and how companies can ensure they are getting value out of outsourcing credits offered by providers. Sample excerpt: “As more companies consider outsourcing initiatives as a means to drive operational cost savings, the opportunity for creative deal structures grows in parallel. These packages are often proposed by providers to increase prospects for closing a deal. Offering what would normally be considered unconventional incentives, a creative deal structure might include a scenario where significant upfront capital investments by the customer (such as payment for the implementation of dedicated systems and servers within a data center) may be offset by the provider's offer of a credit back to the customer…Such a credit is offered as a way to allow the customer to counter ongoing operational charges such as monthly data processing fees or transaction related costs. While this may sound like a good trade-off for the customer, a detailed examination of such creative structures is vital to determining the actual value of specific credits. Just as legal teams would be engaged to advise on the nuances of certain indemnification or limitation of liability provisions within a deal, calling upon finance and accounting expertise when creative deal structures are initially proposed is critical to ensuring a proper examination.”

Business Finance