We have run our supply chain on handshake agreements with key vendors for over a decade because we have great relationships. How do we secure formal contracts before a sale without signaling our exit or triggering vendor price hikes?

Question

Tyler Smith · Accepted Answer

Handshake agreements are a major liability during due diligence. A buyer will not risk their capital on the hope that your vendor will maintain current pricing and terms once you are gone. They want written, transferable contracts that secure your supply chain.

You can secure these agreements without raising suspicion by framing the transition as a standard business continuity and risk management initiative. Tell your vendors that your board of advisors, or your banks, require formalized service level agreements to support your next stage of growth.

Focus on securing contracts with clear assignability clauses, ensuring the agreement remains valid after a change of control. Keep the terms simple, standard, and focused on mutual benefit. By formalizing these relationships on your exit runway, you de-risk your operations and present a clean, institutional-grade business to potential buyers.