Our largest customer accounts for 35 percent of our revenue and has a change of control clause in their contract. The buyer wants to hold back 20 percent of the purchase price in escrow until that client signs a consent to assignment. How do we structure this escrow release or customer transition plan to protect our cash at close?

Question

Tyler Smith · Accepted Answer

Your largest customer having a change of control clause is a classic deal hurdle. Buyers hate this risk and will try to use a massive escrow holdback to protect themselves. Do not let them hold your cash hostage indefinitely. Instead, structure a tiered, milestone-based escrow release tied to specific client transition steps that you control. First, use your EOS Accountability Chart to demonstrate that the client relationship is managed by your account team, not you personally. This proves the relationship is institutionalized. Next, negotiate an escrow agreement where the funds are released in three stages. The first 30 percent releases when the client signs the consent to assignment, which should be targeted within forty-five days post-close. The next 30 percent releases when the client completes their first automated quarterly business review under the new ownership. The final 40 percent releases at the six-month mark, provided the client has not issued a termination notice. To make this palatable to the buyer, include a joint transition plan as a formal exhibit in the purchase agreement. Define exactly who from your leadership team will execute the transition, using the GWC framework to show they are qualified. This structured approach replaces a vague, open-ended risk with a clear operational roadmap. It keeps the buyer from dragging their feet on the transition while ensuring you have a contractually guaranteed path to recover your cash.