M&A Deal Essentials: When One Customer Can Slow Down an Entire Sale: Change of Control Clauses

When One Customer Can Slow Down an Entire Sale: 

Change of Control Clauses 

Many business owners assume that the most important documents in a transaction are the transaction documents themselves. The SPA is negotiated, the purchase price is agreed, financing is arranged, and the parties work towards closing. 

In practice, however, a single customer contract can sometimes have just as much influence over the deal as the SPA itself. One of the less obvious realities of M&A is that signifficantsome of the biggest timing risks are often hidden in commercial agreements that were signed years before anyone considered selling the business. 

Change of Control Clauses in Customer ContractsThe clause that suddenly becomes important 

Many long-term customer and supplier contracts contain change-of-control provisions. From the customer’s perspective, this makes perfect sense. They entered into a relationship with a particular business and may want to know if ownership changes. Depending on the wording, they may have the right to be notified, to approve the transaction, or even to terminate the agreement. 

For years, these clauses often receive little attention. Then a sale process begins. Suddenly, a provision buried deep within a commercial contract becomes one of the most important clauses in the entire transaction. 

Key Customer Relationships and Transaction ValueWhy one customer can matter so much 

Not every change-of-control clause creates a problem. The issue arises when the affected customer is commercially significant. 

If a customer represents a meaningful portion of the company’s revenue, a buyer will naturally want certainty that the relationship will continue after closing. Even where the relationship appears strong, buyers are rarely willing to rely purely on assumptions. 

The question quickly becomes: What happens if the customer objects? 

At that point, the discussion moves beyond legal drafting and into commercial reality. A key account manager or long-standing commercial relationship may suddenly become central to the transaction process. 

Customer Consent: A Commercial Solution to a Legal IssueMore commercial than legal 

What makes these situations interesting is that the solution is often less legal than clients expect. Lawyers can identify the contractual risk and explain its consequences. But the issue is frequently resolved through communication rather than documentation. 

Customers often want reassurance that:  

• the business will continue operating as normal,  

• that key contacts will remain in place, or  

• that the transaction will not affect service quality. 

In other words, their concern is usually not the legal structure of the deal. Their concern is what the deal means for them. Recognising this early often helps keep the process moving. 

Customer Waivers as Closing ConditionsWhen a customer becomes a closing condition 

Clients are often surprised by how important these discussions can become. What starts as a contractual review can evolve into a formal requirement before the transaction can close. 

In our practice, we have encountered many instances where a major customer’s change-of-control rights were treated as an a central issue, crucial issue central to the deal. The parties often require an express waiver and confirmation that the transaction would not trigger termination rights, elevating customer consent to a formal closing condition. 

That reflects a broader deal reality: where a customer relationship is critical to the value of the business, buyers often want certainty before they complete the acquisition. 

Third-Party Consents and Transaction Timetableshe timing risk sits with someone else 

One reason these issues are challenging is that they involve third parties. Corporate approvals, shareholder resolutions, and transaction documents are largely within the control of the buyer and seller. Customer approvals are not. 

The customer may need:  

• Iinternal legal review;. 

•  Procurement teams may need to be consulted;.  

• Senior management may want discussions before providing any form of consent or comfort. 

Even where the customer is supportive, these internal processes can take time. 

As a result, part of the transaction timetable may suddenly depend on an organisation that has no direct stake in whether the deal closes this month or next. 

Due Diligence Review of Customer ContractsWhy experienced deal teams look early 

This is precisely why experienced transaction teams review key customer and supplier contracts early in the deal process. The objective is not only to identify legal risks. It is to identify timing risks. 

A change-of-control issue discovered months before closing is usually manageable. The parties have time to engage with the customer, explain the transaction, and obtain any necessary confirmations. 

The same issue discovered shortly before closing can create significant pressure. At that stage, the entire timetable may depend on securing a response from someone who had no previous involvement in the transaction. 

Looking beyond the SPA 

One of the recurring lessons in M&A is that transaction risk does not always sit where people expect it to. The SPA may be the central document, but it is not always the document that determines timing. Sometimes the most important contract in the deal is a customer agreement signed many years earlier. 

For business owners, the takeaway is simple: When preparing for a sale, do not focus solely on the corporate paperwork. The contracts that drive your business can also drive your transaction timetable.  

And sometimes, one key customer can influence the closing date more than any clause in the SPA.