A change of control is the event triggering certain rights or obligations in a contract when the ownership or control of a contracting party changes. In Australian M&A, change of control clauses commonly appear in customer contracts, supplier contracts, key leases, financing agreements, and IP licences, and may give the counterparty the right to terminate or vary the contract on notice.
Identifying and managing change of control rights in material contracts is one of the most important early diligence tasks. Where a key contract has a change of control termination right, the seller typically needs to obtain the counterparty’s consent before the deal can complete.