How do we audit and prepare our customer and vendor contracts during our exit runway so they do not become major legal hurdles or deal-killers during due diligence?

Question

Tyler Smith · Accepted Answer

Customer and vendor contracts can easily derail a transaction if they contain restrictive clauses that require third-party consent upon a change of control. During your exit runway, you must conduct a thorough audit of every active agreement to identify these potential roadblocks. Look closely at assignability clauses, termination-for-convenience terms, and change-of-control provisions. If your key revenue-generating customer contracts require written consent to transfer the agreement to a buyer, you must begin renegotiating those terms during your standard contract renewal cycles. Shift your agreements to standard corporate templates that allow for assignment to affiliates or successors without consent. This process must be handled carefully so you do not signal to your customers that a sale is imminent. Frame the contract updates as a routine standardization of your legal terms to support future corporate growth. Having transferable, multi-year contracts in place provides the buyer with revenue certainty, which directly supports a higher valuation and a smoother transition process. By proactively removing these legal friction points, you eliminate excuses for the buyer to delay the closing date or renegotiate the purchase price.