We have key client and vendor contracts that are critical to our business, but we do not know if they will survive a change of control. How do we audit and prepare our legal contracts on our exit runway so a buyer does not back out?

Question

Tyler Smith · Accepted Answer

One of the fastest ways to kill a deal during due diligence is for a buyer to discover that your most valuable customer and vendor contracts cannot be legally transferred. You must audit and protect these legal relationships well before you go to market.

Begin by conducting a comprehensive contract audit. Review every active customer agreement, vendor contract, and software license to check for assignability clauses and change-of-control provisions. If a contract requires the other party's written consent to transfer, it represents a major transaction risk.

On your exit runway, systematically update these agreements. When contracts come up for renewal, renegotiate the terms to include standard assignment language that allows transfer to an affiliate or successor entity without consent. If you have key vendors or distributors, ensure your agreements have long-term runway and clear termination notice periods.

If certain strategic partners resist these changes, document alternative options. Proving to a buyer that you have alternative suppliers or a highly diversified customer base reduces the perceived risk of a non-transferable contract. Proactive contract hygiene ensures a smooth transition and keeps the buyer from demanding a steep valuation discount.