Third-Party Consents Can Kill Your Deal

You’ve negotiated the price. You’ve signed the letter of intent. But one overlooked clause in a commercial lease or supplier agreement can bring your entire deal crashing down.

What Are Change-of-Control and Anti-Assignment Clauses?

Many business contracts contain change-of-control or anti-assignment clauses. These clauses require the other party’s consent if:

i.  Ownership of the company changes (even in a share deal).

ii. The contract is assigned to a different legal entity (in an asset deal).

Where These Clauses Commonly Hide

i.  Commercial leases: Landlords often have broad discretion to approve or reject new owners.

ii. Franchise or license agreements: Transferring these may require franchisor approval (sometimes with added fees or conditions).

iii. Client contracts: Long-term service agreements may become void or terminable on change of ownership.

The Cost of Missing a Required Consent

Failing to identify and obtain these consents can:

i.  Breach key contracts.

ii. Trigger early termination.

iii. Reduce the business’s value.

iv. Make the deal impossible to close.

How to Protect Your Deal Before It's at Risk

If you're considering selling your business, reach out early. We can help identify any third-party consents in advance, so there are no unexpected landmines when you have a motivated buyer.

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For more on the M&A process, visit our Mergers & Acquisitions page or our Selling Your Business in Alberta page.

This article is for general informational purposes only and does not constitute legal advice. It does not create a solicitor-client relationship and should not be relied upon as a substitute for advice tailored to your specific transaction or circumstances. If you're navigating the complexities of M&A, remember that the details matter. For expert guidance, feel free to contact Outsiders Law.