We are preparing our business for a sale in three years, but many of our key customer and vendor contracts contain change-of-control clauses. How do we systematically address these legal hurdles during our planning sessions without raising alarms?

Question

Tyler Smith · Accepted Answer

Change-of-control clauses can destroy a deal at the eleventh hour if they are not managed proactively. Buyers hate uncertainty, and the prospect of having to renegotiate key contracts post-acquisition is a major risk. On your exit runway, you must treat these clauses as a critical operational priority. Start by having your legal counsel review every contract to compile a master list of all change-of-control provisions. Once identified, bring this list into your quarterly planning sessions as a major issue. Your goal is to systematically renegotiate these agreements over the next eighteen to twenty-four months. Frame these renegotiations to your clients and vendors as standard corporate updates, perhaps combining them with contract renewals or service expansions. Your objective is to modify the language to allow for assignment to an affiliate or successor without prior written consent, as long as the surviving entity meets certain financial standards. By doing this gradually, you avoid raising red flags or signaling an immediate sale. If a few critical partners refuse to modify their terms, you at least identify the risk early. This allows you to build strong, institutionalized relationships with those accounts, ensuring that when the buyer does eventually reach out for consent, the transition is a formality rather than a leverage point for renegotiation.