Our entire business model relies on exclusive distribution rights with two global manufacturers, and these agreements have change-of-control clauses. How do we de-risk these key supplier relationships during our exit runway without tipping them off too early?

Question

Tyler Smith · Accepted Answer

Exclusive supplier agreements with change-of-control clauses are a double-edged sword. They protect your competitive moat, but they also give those suppliers veto power over your exit. If a key supplier learns about a potential sale too early, they might use the opportunity to renegotiate their pricing, demand shorter payment terms, or even terminate the agreement.

To navigate this risk, you must strengthen the supplier relationships during your runway. Shift the operational relationship away from yourself to your leadership team. Ensure your operations director or procurement manager is the primary point of contact for these suppliers on your Accountability Chart.

Next, audit the contracts. Work with a specialized transactional attorney to review the exact language of the change-of-control clauses. Often, these clauses only trigger if there is an asset sale, whereas a stock sale might bypass the restriction. If you must obtain consent, do not approach the supplier until you have a signed Letter of Intent and a highly credible buyer. Frame the transition as a positive development that brings more capital and scaling opportunities to the partnership. By showing the supplier that the acquisition will increase their order volume, you turn a major legal hurdle into a collaborative transition.