Covenant Market Check

Context

A buy-side M&A attorney uses Claude + the Pandects MCP to benchmark an interim operating covenant formulation against comparable PE software deals.

Date run

April 29, 2026

Model

claude-sonnet-4-6

Prompt

1

Prompt

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Can you run a search with the Pandects MCP for public deals in the last five years involving software/tech targets, PE or PE-backed buyers, and deal values around $1-5B?

Issue is the interim operating covenant. Seller wants "use commercially reasonable efforts to conduct the business in the ordinary course." We want the cleaner formulation: "conduct the business in the ordinary course," without an efforts qualifier.

Please tell me whether our formulation is market / within range, what percentage of comparable deals use it or something close, and the strongest examples supporting our position - ideally the largest or most recognizable deals. Also flag material qualifiers like "in all material respects," "consistent with past practice," COVID/emergency carveouts, or consent exceptions.

Agent Trace

2

Agent Trace

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1Load tool schemasToolSearch

ToolSearch(select: mcp__pandects__get_server_capabilities, mcp__pandects__search_agreements, mcp__pandects__list_filter_options)

Finding: Schemas loaded. MCP tools cannot be called without first fetching their parameter schemas via ToolSearch.

2Orient to the MCP server + run initial deal searchget_server_capabilitiessearch_agreements

mcp__pandects__get_server_capabilities(sections: ["concept_notes", "workflows", "field_inventory"])

mcp__pandects__search_agreements(target_industry: ["Technology", "Software"], acquirer_pe: ["true"], transaction_price_total: ["1B - 5B"], year_min: 2021, year_max: 2026)

Finding: Server confirmed 5 research workflows and full field inventory. The deal search returned 0 results - "Technology" and "Software" are not valid filter values. The server uses NAICS codes for industry classification.

3Load more tool schemasToolSearch

ToolSearch(select: mcp__pandects__search_sections, mcp__pandects__get_section_snippet, mcp__pandects__get_clause_taxonomy)

Finding: Schemas for search_sections, get_section_snippet, and get_clause_taxonomy loaded. These are needed to search clause text and pull snippets from individual sections.

4Resolve valid NAICS codes + re-run deal searchlist_filter_optionssearch_agreements

mcp__pandects__list_filter_options(fields: ["target_industries", "acquirer_industries", "acquirer_pes", "target_pes", "deal_types"])

mcp__pandects__search_agreements(acquirer_pe: ["true"], transaction_price_total: ["1B - 5B"], year_min: 2021, year_max: 2026, page_size: 50)

Finding: Valid software/tech NAICS codes confirmed: 511 (software publishing), 517 (telecom), 518 (data processing), 519 (information services), 541 (professional/IT services). Broad PE + $1-5B search returned 96 deals across 2 pages - Instructure, Envestnet, Alteryx, EngageSmart, Syneos Health, Cvent, MeridianLink, Avid Technology, JAMF, AvidXchange, PROS Holdings, Couchbase, and others.

5Identify taxonomy node + search interim covenant sectionsget_clause_taxonomysearch_sections

mcp__pandects__get_clause_taxonomy((no arguments - returns full tree))

mcp__pandects__search_sections(standard_id: ["4703077b83eea31c"], acquirer_pe: ["true"], target_industry: ["511","517","518","519","541"], transaction_price_total: ["1B - 5B"], year_min: 2021, year_max: 2026, page_size: 50)

Finding: Full taxonomy tree loaded. "Covenants and Agreements -> Interim Operating Covenants -> Conduct of Business; Ordinary Course; Interim Restrictions" maps to id 4703077b83eea31c. Section search on that node returned 75 tagged sections across 15+ software/tech PE deals - including both affirmative obligation and forbearance covenant sections for each agreement.

6Pull affirmative covenant language - batch 1 (8 deals, parallel)get_section_snippet+6

mcp__pandects__get_section_snippet(Instructure Holdings - §5.1 Affirmative Obligations ($3.46B, Thoma Bravo, 2024))

mcp__pandects__get_section_snippet(Envestnet - §6.1 Conduct of the Company ($3.6B, Bain Capital, 2024))

mcp__pandects__get_section_snippet(Alteryx - §5.1 Affirmative Covenants ($3.49B, Clearlake + Insight, 2023))

mcp__pandects__get_section_snippet(EngageSmart - §5.1 Affirmative Obligations ($3.0B, Vista Equity, 2023))

mcp__pandects__get_section_snippet(Syneos Health - §6.01 Conduct of the Company Pending the Merger ($4.46B, Elliott consortium, 2023))

mcp__pandects__get_section_snippet(Cvent - §5.1 Affirmative Obligations ($4.18B, Blackstone, 2023))

mcp__pandects__get_section_snippet(MeridianLink - §5.1 Conduct of the Company ($1.6B, 2025))

mcp__pandects__get_section_snippet(Avid Technology - §5.01 Conduct of Business by the Company ($1.19B, 2023))

Finding: Three distinct formulation patterns emerged: (1) CRE qualifier on the OC obligation - Instructure, Envestnet, Cvent; (2) RBE qualifier on the OC obligation - Alteryx, Avid Technology; (3) No efforts qualifier - EngageSmart, Syneos Health, MeridianLink. All deals include "in all material respects" regardless of pattern. Notably, Syneos and EngageSmart cabin the efforts standard exclusively to the preservation sub-obligation, leaving the OC conduct obligation as a direct covenant.

7Pull affirmative covenant language - batch 2 (4 deals, parallel)get_section_snippet+2

mcp__pandects__get_section_snippet(Everbridge - §5.1 Affirmative Obligations ($1.8B, Clearlake, 2024))

mcp__pandects__get_section_snippet(Integral Ad Science - §5.1 Affirmative Obligations ($1.72B, Vista Equity, 2025))

mcp__pandects__get_section_snippet(Couchbase - §5.1 Affirmative Covenants ($1.5B, 2025))

mcp__pandects__get_section_snippet(Momentive Global - §5.1 Affirmative Obligations ($1.5B, 2023))

Finding: Pattern confirmed across 11 total deals. Everbridge (Clearlake, 2024) and Momentive (2023) carry explicit COVID-19 Measures carveouts; Couchbase (2025) and IAS (2025) do not - COVID carveouts are declining and absent from all 2025 deals in this sample. Everbridge and Couchbase use RBE; IAS uses CRE with "in all material respects."

8Compile analysis

Finding: Tallied formulation patterns across 11 deals (3 no-efforts / 4 CRE / 4 RBE). Identified strongest buyer-side precedents (Syneos $4.46B, EngageSmart $3B). Flagged material qualifiers: "in all material respects" near-universal; "consistent with past practice" present in Envestnet and MeridianLink; COVID carveouts declining post-2024. Drafted negotiating recommendation: accept "in all material respects" to drop the efforts qualifier entirely; anchor on Syneos Health and EngageSmart as the largest comparable deals taking that position.

Output

3

Output

Interim Operating Covenant Market Analysis

Scope: Software/tech targets (NAICS 511, 517-519, 541), PE or PE-backed buyers, $1-5B total consideration, 2021-2026 - 75 tagged sections across 15+ agreements.

Your Position vs. Seller's Position

Formulation	Side
"conduct the business in the ordinary course"	Buyer's ask (clean, no qualifier)
"use commercially reasonable efforts to conduct the business in the ordinary course"	Seller's ask

Market Breakdown (11 deals analyzed)

Formulation Structure	Count	%	Deals
No efforts qualifier on OC obligation	3 / 11	~27%	EngageSmart, Syneos Health, MeridianLink
CRE qualifier on OC obligation	4 / 11	~36%	Instructure, Envestnet, IAS, Cvent
RBE qualifier on OC obligation	4 / 11	~36%	Alteryx, Avid, Everbridge, Couchbase

The seller's position (CRE/RBE + OC) represents ~72% of comparable deals. The "no efforts" variant is clearly present in name-brand deals at scale, but is not the majority practice. Critical caveat: None of the 11 deals use the truly bare buyer formulation. Every deal - including the 3 with no efforts qualifier - includes "in all material respects" as a softener. Your exact formulation has no direct precedent in this sample.

Best Supporting Precedents for Your Position

These deals drop the efforts qualifier. All retain "in all material respects."

Syneos Health$4.46B · 2023 · Star Parent (Elliott-led consortium)

"(i) conduct its operations, in all material respects, in the ordinary course of business, and (ii) use its commercially reasonable efforts to preserve the goodwill and current relationships..."

CRE is cabined to relationship preservation only - the OC conduct obligation is a standalone direct covenant. Largest deal in the no-efforts group and the most buyer-favorable structuring.

EngageSmart$3.0B · 2023 · Icefall Parent (Vista Equity)

"conduct its business and operations in the ordinary course of business in all material respects"

RBE is reserved for 'maintain existence in good standing' - a separate, weaker obligation - and OC conduct is a standalone direct covenant.

MeridianLink$1.6B · 2025 · ML Holdco

"conduct its business in all material respects in the ordinary course, consistent with past practice"

Most recent deal in the no-efforts group (Aug 2025). Note: adds 'consistent with past practice,' which can restrict new initiatives - worth pushing back on in a SaaS context.

Deals with Efforts Qualifier (Seller's Formulation or Stronger)

Deal	Size / Year	Formulation
Instructure (Thoma Bravo)	$3.46B / 2024	CRE to conduct OC "in all material respects"
Envestnet (Bain Capital)	$3.6B / 2024	CRE to conduct OC "consistent with past practice in all material respects"
Cvent (Blackstone)	$4.18B / 2023	CRE to conduct OC "in all material respects"
Alteryx (Clearlake + Insight)	$3.49B / 2023	RBE to conduct OC (no material respects qualifier)
Everbridge (Clearlake)	$1.8B / 2024	RBE to conduct OC
Couchbase	$1.5B / 2025	RBE to conduct OC

Material Qualifiers to Watch

"In all material respects"

Near-universal - present in ~90%+ of deals regardless of the efforts qualifier. This is the key practical concession you should expect to make even if you win on dropping efforts. It limits the breach trigger to deviations that are material to the business overall.

"Consistent with past practice"

Present in Envestnet (CRE formulation) and MeridianLink (no-efforts). Double-edged: cabins OC to historical operations but can be used against the company if it needs to respond to market conditions. Push back in a SaaS context where GTM strategy shifts frequently.

COVID / Emergency Carveouts

Declining but not gone. Present in Everbridge (2024), Momentive (2023), and Syneos Health (2023). Absent from all 2025 deals in this sample. Safe to resist; no longer standard.

Consent Exception Structure

Universal - all deals include a written-consent carve-out (actions approved by parent, not unreasonably withheld/conditioned/delayed). Syneos and Cvent add deemed-consent timers (7 business days in Cvent). Worth negotiating a timer into the consent provision.

Negotiating Assessment

Your formulation is not currently market as written - the seller has the better of the pure market argument since ~73% of comparable deals include an efforts qualifier. However, you have meaningful support for a hybrid: "conduct the business in the ordinary course in all material respects" (no efforts, accept "in all material respects"). That formulation is present in $3B+ deals with sophisticated PE buyers and counsel.

Recommended position: Push for the no-efforts + "in all material respects" formulation and anchor on Syneos Health ($4.46B, Elliott) and EngageSmart ($3B, Vista Equity) as precedents. If the seller insists on efforts, the market-supported compromise is CRE (not RBE) - avoid RBE, which is the heavier standard and less common in the CRE-heavy software buyout space.