When it comes to preparing your company for sale, the smallest details often create the biggest problems. And few details cause more last-minute headaches than assignment clauses buried deep inside your contracts.
These clauses determine whether — and how — your customer, vendor, or lease agreements can be transferred to a new owner. If they’re missing, restrictive, or require third-party consent, your deal can be delayed or even derailed.
At Legacy Advisors, we’ve seen deals nearly fall apart over assignment language that no one had looked at in years. The good news is that a proactive contract review can prevent those issues long before diligence begins.
Why Assignment Clauses Matter
During due diligence, buyers want to ensure that all key contracts — customer agreements, supplier deals, leases, and licenses — can be legally transferred to them once the transaction closes.
If a contract says it cannot be assigned without written consent, that means you’ll need approval from the other party before the deal can close. In some cases, those consents take weeks or months to secure — and if a partner refuses, it could jeopardize the entire transaction.
In The Entrepreneur’s Exit Playbook, I wrote: “Contracts are the arteries of your business. If the flow of obligations and rights can’t transfer cleanly, the heart of the deal stops beating.”
Clean assignment language keeps that flow uninterrupted.
What Buyers Look for in Contracts
Buyers review contracts to confirm that:
- Agreements are legally valid, signed, and current.
- All key contracts are assignable to a new owner without requiring third-party consent.
- No contract contains change-of-control clauses that trigger renegotiation or termination upon sale.
- There are no hidden liabilities or obligations that would carry over post-close.
If buyers find restrictive clauses, they’ll either demand that you fix them before closing or adjust the purchase price to account for risk.
Common Assignment Problems
Even strong businesses can run into avoidable contract issues. Some of the most common include:
- Missing assignment clauses in customer or vendor agreements.
- Consent-to-assign requirements that delay or complicate the sale.
- Change-of-control provisions that allow termination if ownership changes.
- Expired or unsigned contracts that can’t be enforced or transferred.
- Conflicting contract versions that create uncertainty about which terms apply.
Each of these issues adds friction to diligence and gives buyers leverage to renegotiate.
Lessons from Experience
When I sold Pepperjam, one of our earliest diligence tasks was reviewing every material contract for assignment rights. We discovered that a few older agreements required written consent for transfer. We contacted those partners months in advance and secured approvals before the buyer ever asked. That preparation helped us close without delay.
On the Legacy Advisors Podcast (https://legacyadvisors.io/podcast/), Ed and I have shared stories from founders who weren’t so lucky. In one case, a landlord’s refusal to approve lease assignment delayed closing by 90 days. In another, a top supplier used the consent process to renegotiate terms. Both could have been avoided with early review.
How to Review Contracts for Assignment Risk
Here’s how to get started:
1. Identify all key contracts.
Focus on your top 20–30 agreements that represent the majority of your revenue, expenses, or strategic relationships.
2. Check for assignment or change-of-control language.
Look for clauses that limit transferability or require third-party consent.
3. Flag high-risk contracts.
Prioritize those that are essential to daily operations or represent a large portion of revenue.
4. Engage legal counsel.
Have your attorney review language and help you contact counterparties for consent, if needed.
5. Document everything.
Maintain a clear record of all consents and correspondence for inclusion in your data room.
The goal is to have every contract clean, assignable, and well-documented before diligence begins.
The Valuation Advantage
Buyers love predictability. When all your contracts are assignable and properly documented, they know the business they’re buying will continue to function on day one.
Conversely, unclear or restrictive assignment terms create uncertainty — and uncertainty lowers offers. By cleaning up your contracts in advance, you not only protect deal value but also signal that your company is professional, organized, and ready for transfer.
Final Thoughts
In M&A, contracts are the connective tissue of your business. When they’re clean and assignable, deals flow smoothly. When they’re messy or restricted, even the best businesses can stumble.
Exits don’t happen when you feel ready — they happen when your business is ready. And readiness means every agreement you’ve signed can transfer seamlessly to your buyer.
Find the Right Partner to Help Sell Your Business
At Legacy Advisors, we help founders conduct pre-sale contract reviews, identify assignment risks, and secure the necessary consents before going to market.
Visit legacyadvisors.io to connect with our team, listen to the Legacy Advisors Podcast (https://legacyadvisors.io/podcast/), and explore insights from The Entrepreneur’s Exit Playbook. Together, we’ll make sure your contracts — and your company — are ready for a clean, confident exit.
Frequently Asked Questions About Contract Assignment in M&A
What is an assignment clause, and why is it important before selling a business?
An assignment clause determines whether a contract can be transferred to another party — in this case, your buyer — during a business sale. If your contracts don’t include clear assignment language or require third-party consent, the buyer might not be able to assume those agreements after closing. That can create serious risk, especially if the contracts involve key customers, suppliers, or leases. Buyers want certainty that the business they’re acquiring will continue operating without interruption, so assignment rights are a major focus in due diligence.
What types of contracts are most critical to review before a sale?
You should review every agreement that impacts your company’s revenue, expenses, or operations. That includes customer contracts, supplier agreements, leases, software licenses, service provider relationships, and distribution or partnership deals. These are considered “material contracts” — the backbone of your business relationships. Buyers will closely analyze each to ensure they’re assignable, enforceable, and free of change-of-control restrictions that could delay or disrupt the deal.
What happens if my contracts require third-party consent for assignment?
If an agreement can’t be assigned without consent, you’ll need to approach the counterparty for written approval before the sale closes. That process can take time, especially if the other party wants to renegotiate terms. In some cases, they may even refuse consent, which can create closing delays or reduce deal value. The key is to identify these clauses early and start those conversations months before diligence begins. Being proactive gives you leverage — waiting puts the buyer in control.
Can missing or restrictive assignment clauses affect valuation?
Absolutely. Buyers view restrictive or unclear assignment terms as operational risk. If key customer or vendor relationships can’t transfer easily, they may discount the purchase price, delay closing, or require escrow holdbacks to offset uncertainty. Clean, assignable contracts, on the other hand, increase buyer confidence and make your business more attractive. In The Entrepreneur’s Exit Playbook, I explain that “the best deals close quickly because there are no unknowns left to negotiate” — and that starts with contract clarity.
How can Legacy Advisors help me prepare my contracts for a sale?
At Legacy Advisors, we help founders audit their contracts well before going to market. We identify assignment risks, confirm enforceability, and coordinate with your attorneys to secure the necessary consents or amendments in advance. Our team ensures every major contract is organized, current, and transferable, so diligence moves smoothly and buyers stay confident. Drawing insights from The Entrepreneur’s Exit Playbook and the Legacy Advisors Podcast (https://legacyadvisors.io/podcast/), we help you transform potential deal friction into one of your greatest selling points — a clean, compliant, and fully assignable contract portfolio.