Our primary service delivery relies heavily on a few key vendor and software licenses that have strict change-of-control clauses. How do we restructure these agreements on our exit runway to prevent a buyer from facing operational disruptions?

Question

Tyler Smith · Accepted Answer

Key vendor agreements and software licenses with change-of-control clauses are hidden landmines in a transaction. If a critical supplier has the right to terminate or renegotiate terms upon a change in ownership, a buyer will see this as a significant operational risk and discount your valuation. To manage this, review all your major third-party contracts and highlight any change-of-control, assignment, or termination-for-convenience clauses. Work to renegotiate these terms during your normal renewal cycles on your exit runway. Your goal is to secure pre-consent to assignment clauses, which allow you to transfer the contracts to an acquirer without requiring the vendor's explicit approval at the time of the sale. If a vendor refuses to remove the change-of-control clause, focus on building alternative supplier relationships to prove to a buyer that you have redundant operational capacity. Document these backup options in your standard operating procedures. By showing that you can easily switch vendors without interrupting client delivery, you neutralize the vendor's leverage and reassure the buyer that your supply chain is resilient.