The Consent Problem: How Change-of-Control Clauses Decide Your Close Date

By the MeridianCogent team — built from working with integration offices, separation leaders and PE operating partners on M&A execution. This perspective is drawn from published carve-out and legal research across the industry.

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There is a particular meeting that happens about eight weeks before close in most carve-outs. Someone from legal reports that the contract review has turned up more change-of-control provisions than the plan assumed, that a handful of them sit in contracts the business genuinely cannot operate without, and that several counterparties have not responded to the consent request sent a month ago.

Nobody in that meeting is surprised the clauses exist. What surprises people is the volume, and how little leverage anyone has left by the time the volume is known.

What the clause actually does

A change-of-control provision gives a counterparty rights when the other party is acquired, merges, or undergoes a substantial change in ownership. It usually produces one of two outcomes: the change counts as a deemed assignment requiring the counterparty's consent, or the counterparty simply gets a right to terminate.

The distinction between assignment and novation matters more than it sounds. Assignment transfers rights and sometimes duties, but the original party frequently remains liable — silence on the point usually means it stays liable. Novation releases the original party and substitutes the new one. A carve-out that assumes its contracts are being novated when they are in fact being assigned leaves the seller on the hook for performance it no longer controls.

Whether an acquisition counts as an assignment at all is heavily litigated. A stock sale where the contracting entity survives often is not a traditional assignment, which is exactly why sophisticated contracts spell it out rather than leaving it to the default.

Why carve-outs are worse than whole-company sales

A whole-company acquisition triggers change-of-control provisions. A carve-out triggers those and the assignment provisions, because the business is being physically separated rather than simply changing hands.

Lexology's 2026 carve-out guidance is direct about the structural cause: carve-outs frequently require the creation of new drop-down entities, internal tuck-in transactions, and pre-closing restructuring steps to isolate the business being sold. Each of those steps can involve transferring or reissuing permits and licences, novating or assigning material contracts, and obtaining governmental or third-party consents. The result is that a transaction structured as a stock sale takes on hybrid characteristics, implicating both asset-level and change-of-control analysis at once.

Practitioner analysis of carve-out entanglements consistently ranks change-of-control clauses in customer and supplier contracts among the small number of issues that cause most of the delay and most of the unbudgeted cost — alongside shared ERP instances and non-assignable enterprise software licences.

The leverage problem nobody plans for

Here is the part that catches teams who have only done whole-company deals.

Making third-party consent a condition to closing is the buyer's natural protective instinct. It stops you acquiring a business whose key contracts can be terminated the week after you own it. But it creates two problems that are worse than the one it solves.

The first is that it tells the counterparty a deal is happening and hands them a timeline to hold hostage. A customer who knows its consent is a closing condition has every incentive to delay, extract concessions, or reopen commercial terms that have nothing to do with the ownership change. Consent requests arriving mid-process are effectively an invitation to renegotiate, and counterparties who have been waiting for a pricing conversation now have one.

The second is subtler. A failed consent means a failed closing condition, which means the seller keeps the business — possibly to sell to someone else on better terms. The buyer has built the seller an exit.

The alternative is closing without the consent and pricing the termination risk into the purchase price, an escrow, a holdback, a specific indemnity, or some combination. That is a real trade, not a workaround, and it is a trade best made deliberately rather than at week eleven because the consent did not arrive.

The mechanisms that actually help

Three things separate the deals where consents are a workstream from the deals where consents are a crisis.

Mapping before the process starts. The contract population needs to be reviewed for change-of-control and assignment language before the business goes to market, not during diligence. The consistent advice from contract practitioners is to map these terms ahead of a sale process specifically so the consents do not surprise anyone in diligence — at which point the timeline is already fixed and the leverage is already gone.

Tiering by consequence, not by contract value. A contract with an automatic termination right and no cure period is a different problem from one requiring consent not to be unreasonably withheld. Sorting the population by what actually happens on a change of control — terminate, consent required, notice only, silent — tells you where the real exposure sits, which is rarely where the biggest contracts are.

Deemed-consent timelines. Where a clause says consent must not be unreasonably withheld but sets no deadline, the counterparty can delay indefinitely, which converts a reasonable-consent standard into an absolute veto in practice. A deemed-consent fallback of thirty days is the standard fix, and it is worth knowing which of your contracts have one before you need it.

Where the population is bigger than you think

Change-of-control provisions are not confined to customer and supplier agreements. They routinely appear in:

The government contracting case is worth flagging separately, because it is not a consent negotiation at all — it is a regulated process with its own timeline that no amount of commercial goodwill accelerates.

Lessons learned

The count is always higher than the estimate. Assignment clauses are routinely buried in miscellaneous or boilerplate sections, which is exactly why they get missed in review. A single overlooked anti-assignment provision in a material customer contract can delay a close.

Consent is a workstream, not a legal task. It needs an owner, a tracked population, a status per contract, and a view of which items sit on the critical path to closing. A list of contracts in a diligence folder is not that.

Ask early and you lose leverage. Ask late and you lose time. There is no clean answer to this, which is why the sequencing decision should be made explicitly by the deal team rather than defaulting to whenever legal finishes the review.

The ones that hurt are rarely the biggest. The contract that decides your close date is usually a mid-sized supplier agreement with an automatic termination right and a counterparty who has been waiting for an excuse to renegotiate.

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Sources: Lexology, "Carve-Outs Are In: Practical Guidance as Activity Rises in 2026"; Potomac Law, "The Change of Control Problem Nobody Owns in M&A Until It's Too Late"; BD Emerson carve-out entanglement analysis; contract practitioner guidance on assignment and change-of-control drafting including FAR Subpart 42.12 novation requirements.