We have multi-year recurring contracts with our top customers, which we believe justifies a high valuation multiple. However, these agreements contain strict change-of-control clauses. How do we prove the durability of these contracts to a buyer without risking our customer relationships by asking for consent too early?

Question

Tyler Smith · Accepted Answer

Multi-year agreements are only valuable to a buyer if they survive the transaction. Strict change-of-control clauses are a common leverage point that sophisticated buyers will use to demand a price reduction during due diligence, claiming the revenue is at risk. You must handle this carefully to avoid alerting your clients before the deal is certain.

Begin by categorizing your contracts based on their specific language. Some clauses require prior written consent, while others merely require post-closing notification. Focus your initial efforts on the contracts that represent the bulk of your revenue. Do not approach these clients until you have a signed Letter of Intent with a committed buyer and a clear path to closing.

To mitigate the buyer's anxiety before that point, demonstrate a track record of contract renewals and high customer satisfaction. Show them your operational data, including historical customer retention rates and Net Promoter Scores. Highlight that your service delivery is managed entirely by your team, not by you personally.

When the time comes to secure consent, present it as a seamless transition. Frame the acquisition as a positive step that brings more resources to serve them. Having your leadership team lead these conversations, rather than you, reassures the client that the operational relationship remains unchanged.