Key takeaways
- Third-party consents should be identified before LOI, not during the final week before closing.
- Consent risk is different from assignability risk: some contracts transfer automatically, some require notice, and some require approval.
- The highest-risk consents are usually tied to revenue concentration, operating licenses, lenders, landlords, software systems, government contracts, and franchise rights.
- A consent plan should define timing, message, owner, fallback, and closing condition impact.
- Buyers convert unresolved consents into closing conditions, escrows, purchase price changes, or delayed close.
Not every closing risk sits inside the purchase agreement
For adjacent context, compare this with Lease Assignment and Landlord Consent, Customer Contract Assignability, and M&A Closing Checklist. Those articles cover specific pieces; this article covers the full consent map.
Deal-term research and transaction practice continue to show that closing conditions, assignment issues, and third-party approvals are central execution risks in private M&A.
For sellers, the practical task is to identify who can block, delay, or complicate closing before the buyer does.
Consent risk is manageable when it is mapped early and sequenced carefully.
Third-party consent
Approval, waiver, notice, or acknowledgement required from a non-party before a contract, license, permit, or relationship transfers or remains valid
Anti-assignment clause
A contract provision restricting assignment or transfer without consent
Change-of-control clause
A provision triggered by ownership change even if the contract itself is not assigned
A founder may think the deal is between seller and buyer. In practice, lenders, landlords, franchisors, customers, suppliers, software vendors, regulators, licensors, and government agencies may all have a say. Some only require notice. Some require consent. Some can terminate. Some can use the transaction as leverage.
The worst consent issue is the one discovered after the purchase agreement makes it a closing condition.
The consent inventory
A consent inventory should be built before buyer diligence. It identifies the contract or right, the trigger, the consent requirement, the business impact, and the timing plan.
Consent Inventory
Customer contracts
Assignment, change of control, notice, termination, pricing reset, most-favored-customer, or key-person provisions.
Supplier agreements
Supply continuity, exclusivity, volume rebates, assignment, credit terms, and price reset rights.
Software and data licenses
Transfer restrictions, user limits, data-processing terms, and vendor approval rights.
Leases and real estate
Landlord consent, assignment fees, guarantees, estoppel certificates, and lease amendments.
Lenders and liens
Change-of-control consent, payoff letters, UCC releases, and personal guarantee releases.
Permits and licenses
Regulatory approvals, professional licenses, healthcare licenses, environmental permits, and operating certificates.
Franchise or dealer rights
Franchisor approval, transfer fees, buyer qualification, and brand standards.
Government contracts
Novation, assignment, eligibility, set-aside, or agency approval rules.
The consent plan should separate must-have consents from nice-to-have notices. Buyers care most about consents that affect revenue continuity, legal operation, or closing certainty.
How to manage consent timing
Consent timing is sensitive because asking for approval may reveal the transaction before the seller is ready. That does not mean the issue should be ignored. It means the seller needs a staged plan.
Frequently asked questions
Should a seller ask for consents before signing an LOI?
Usually not broadly, but the seller should identify requirements before LOI and plan the sequence. Some lender, regulatory, or license issues may need earlier work.
What if consent cannot be obtained before closing?
The parties may delay closing, carve out the asset, create a transition service, require post-closing covenant, or adjust price or escrow.
What is the biggest mistake?
Assuming a stock sale avoids all consents. Change-of-control clauses can trigger even when contracts are not assigned.
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Disclaimer: Financial figures and case-study details in this article are anonymized, composite, or representative examples based on middle market operating situations, and are not guarantees of outcome. Statistical references are drawn from cited third-party research; individual transaction and operational results vary based on business characteristics, market conditions, and deal structure. This content is for informational purposes only and does not constitute legal, financial, or investment advice. Consult qualified advisors for guidance specific to your situation.
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