Selling your business isn’t always just between you and the buyer. In many cases, other parties — such as customers, suppliers, lenders, or landlords — may have a contractual or legal right to approve whether their agreements are part of the sale.
These third-party consents can be a critical path item in the transaction timeline. If they’re overlooked or delayed, they can slow negotiations or reduce the deal’s value.
What Is Third-Party Consent?
A third-party consent is permission you must obtain from an outside party before a their agreement is part of the sale. These requirements are usually buried in contracts or tied to specific relationships your business depends on.
Common Types of Third-Party Consents
Contractual Consent Rights
Many contracts — especially with major customers, vendors, or landlords — have change of control clauses. These clauses give the other party the right to agree whether their agreement is sold and assigned if your business changes ownership. This can apply to a stock or asset sale or a merger. Sometimes it even applies if a buyer buys more than 50% of the stock of your business.
Lender Consent
If your business has loans, your lender may require approval before you sell. Loan agreements often contain covenants restricting significant ownership changes.
Landlord Consent
Most lease agreements require obtaining the consent of the landlord before a sale of the business. Landlords may want to make sure the new owner has the ability to pay rent and meet the other obligations under the lease.
Key Contracts
Vital contracts with key vendors and customers may require consent before a sale of the business. This is because they want to know who they are doing business with and that they are a good fit.
Stockholder or Partner Approval
In most corporate structures, your company’s governing documents outline how many owners need to agree before the business can be sold. Sometimes this requires a simple majority; other times it requires a supermajority. Ensuring that the required owners are aligned on a sale before you start the process is critical.
Regulatory Approval
Some industries — such as healthcare, finance, or telecommunications — require specific regulatory sign-off before ownership can change hands.
Key Employee Consent
Not always legally required, but strategically important. If certain employees are essential to operations, buyers may want them to commit to staying post-sale through new employment agreements.
Why It’s Critical to Identify Consent Requirements Early
If a contract counterparty refuses to give consent, then the obligation under that agreement would remain with the seller if an asset sale or could simply prevent a stock sale or merger from closing.
If you find out too late that a major customer or supplier can walk away after a sale, it can scare off buyers or slash your valuation. Early identification lets you:
- Negotiate amendments or waivers in advance.
- Build trust with important partners.
- Avoid last-minute deal disruptions.
Tips for Securing Third-Party Consents
- Review all major contracts well before going to market.
- Prioritize relationship management. A customer who values your partnership is more likely to approve a change of control.
- Get professional help. Your attorney can flag risky clauses and help you negotiate more favorable terms.
- Time your requests carefully. Consents need to be provided at or prior to closing. Sellers will often wait until they are sure the deal is going to close before asking for consent, but they cannot wait too long if the other party has questions before they will sign the consent..
Bottom Line
Third-party consents may feel like a formality, but they can make or break a deal. Address them early, handle them strategically, and you’ll remove a major source of risk from your transaction.
FAQs
Q: What’s the biggest risk of ignoring third-party consent requirements?
A: Losing a key contract or relationship post-sale, which can significantly reduce your business’s value or cause the buyer to walk away.
Q: How long does it take to get third-party consent?
A: It depends on the relationship and complexity of the contract — but it’s safest to allow several weeks.
Q: Can a buyer help secure these consents?
A: Sometimes, but most buyers prefer the seller to handle this before closing to reduce uncertainty.
