Key points
- Single-source supply is a common concern.
- Owner-held supplier relationships should be transferred.
- Some contracts contain change-of-control clauses.
- Written terms reduce uncertainty.
Buyers look at the supply side as well as customers. Dependence on one supplier, or on the owner's personal relationship with it, is a transferability risk.
Which supplier issues concern buyers?
- Single-source supply of a critical product or service
- Exclusive agreements that limit the business — or that it depends on
- Supplier relationships held personally by the owner
- Price dependence: exposure to one supplier's pricing decisions
- Key distribution or licensing rights that could be withdrawn
- Informal arrangements with no written terms
Why might a change of ownership matter to a supplier contract?
Some commercial agreements contain change-of-control provisions allowing the other party to terminate or renegotiate if the business is sold. Whether such a clause exists, and how it operates, depends on the specific contract; legal advice should be taken.
How can supplier risk be reduced?
Identify alternative suppliers, formalise terms in writing, transfer relationships to managers and understand any rights the supplier has on a change of ownership.
This guide is general commercial information based on professional experience of UK SME transactions. It is not legal, tax, accounting or financial advice, and transaction-specific requirements vary. Take advice from appropriately qualified professionals before acting.