We are about to hire an investment banker, but I am terrified of hidden deal killers in our existing customer contracts. How do I use structured Thinking Time to audit our client relationships for change of control and termination liabilities before we go to market?

Question

Tyler Smith · Accepted Answer

A successful exit can easily be derailed by change of control clauses or restrictive termination liabilities buried in your customer contracts. To prevent these deal killers, you must dedicate structured Thinking Time to audit your client agreements well before you go to market. Set aside a quiet thirty-minute session with a blank notepad and ask yourself: how might we identify and neutralize every contract clause that requires client consent during an acquisition? Begin by reviewing your top ten client contracts, which usually account for the majority of your revenue. Look specifically for transferability clauses, assignment restrictions, and termination-for-convenience terms. If a major client has the right to walk away the moment your business changes hands, a buyer will dramatically discount your valuation or walk away from the deal entirely. Once you identify these problematic clauses, do not panic. Convert them into actionable issues on your weekly leadership team Issues List. During your runway, work with your legal counsel to systematically renegotiate these terms during normal contract renewals, framing the changes as standard administrative updates. By proactively cleaning up your client agreements, you eliminate a major due diligence risk and prevent paying a devastating dumb tax during negotiations.