How do we prevent change of control consent requirements in our client contracts from discounting our valuation multiple during due diligence?

Question

Tyler Smith · Accepted Answer

If your customer contracts contain change of control clauses, a buyer will often try to use them as leverage to discount your valuation multiple. They will argue that the risk of customers leaving rather than consenting to the acquisition decreases the predictability of your future revenue. To protect your multiple, you need a proactive plan to address these clauses before due diligence begins.

Start by categorizing your contracts by revenue contribution. For your top clients, prepare a structured communication plan that outlines how the transition will actually benefit them, such as giving them access to more resources or a wider service offering. Do not approach these clients for consent until the LOI is signed and you are close to the finish line, but have the materials ready.

For the remaining contracts, show the buyer your historical customer retention data and your systemized onboarding process. Prove that your customer relationships are tied to your operational systems and your leadership team, not to the departing founder. By showing that your business runs on a self-managing operating model where client delivery is consistent regardless of ownership, you can argue that the risk of non-consent is statistically negligible, neutralizing the buyer's attempt to discount your multiple.