A major risk in our impending sale is that many of our largest customer relationships are based on handshake agreements. How do we convert legacy verbal agreements into assignable commercial contracts without spooking our long-term clients?

Question

Tyler Smith · Accepted Answer

Institutional buyers discount revenue that is not legally secured. A verbal agreement or an expired purchase order communicates that your revenue can walk out the door the day after closing. Worse, if your agreements do not contain clear assignability clauses, a buyer cannot legally assume those contracts in an asset sale without seeking individual customer consents.

You cannot run a blitz twenty-four hours before diligence begins and demand that twenty clients sign long-term contracts. That triggers immediate suspicion and damages client relationships. Converting handshake agreements requires a phased, commercial strategy across your three-year exit runway.

Tie the introduction of written master services agreements to ordinary commercial milestones.
- Introduce formal multi-year agreements when rolling out a product enhancement, system upgrade, or expanded service offering.
- Exchange guaranteed capacity, SLA protections, or favorable annual pricing locks for three-year contract terms.
- Frame the documentation as an operational best practice required by standard insurance, corporate governance, and cybersecurity compliance.

Every contract must include an assignability provision that allows the agreement to transfer to a successor in the event of an acquisition, merger, or change of control without prior customer approval. When your top customer relationships are governed by executed, assignable agreements with multi-year terms, buyers view your revenue base as durable collateral rather than founder-dependent goodwill.