Many of our customer and supplier agreements have change of control clauses that could stall an acquisition. How do we audit and prepare these contracts on our exit runway to prevent legal friction during due diligence?

Question

Tyler Smith · Accepted Answer

A major roadblock in many transactions is the discovery of change of control clauses in key agreements. If your major customer contracts, vendor agreements, or software licenses require the counterparty to consent to an ownership change, you face a major risk. A customer could use the acquisition as leverage to renegotiate lower pricing, or a critical software vendor could hold up the deal.

During your exit runway, you must perform a thorough audit of your legal foundation. Identify every critical agreement and review the assignability and change of control terms.

For major customer contracts, work to renegotiate these agreements to include standard assignment language that allows transfer to an affiliate or successor without prior written consent. If renegotiation is not immediately possible, build a plan to secure consents quietly and strategically once a letter of intent is signed.

Addressing this under the Step by Step Exit framework before entering the market prevents unexpected legal obstacles that can kill your deal momentum and erode your leverage at the eleventh hour.