Anti-Assignment Clauses in M&A: What Every Deal Attorney Should Know

An anti-assignment clause is a contractual provision that restricts or prohibits a party from transferring its rights or obligations under an agreement to a third party. These provisions are among the most commonly encountered restrictions during M&A due diligence, appearing in everything from customer contracts and vendor agreements to real estate leases and intellectual property licenses. When an acquisition effectively transfers a target company's contractual relationships to a new owner, anti-assignment clauses determine whether those relationships survive the transaction.

Why Anti-Assignment Clauses Matter in M&A

Every acquisition involves, at its core, a transfer of contractual relationships. The target company's agreements with customers, vendors, landlords, licensors, and partners form the commercial foundation that drives deal value. Anti-assignment clauses are the contractual gatekeepers that determine which of those relationships transfer smoothly and which require counterparty consent, renegotiation, or creative deal structuring.

The risk is asymmetric. An acquirer who identifies assignment restrictions early can plan around them through transaction structuring, consent solicitation, or purchase price adjustments. An acquirer who discovers them post-signing faces counterparties with significant leverage, the potential loss of material contracts, and deal economics that no longer work.

Three Types of Anti-Assignment Provisions

Not all anti-assignment clauses carry the same risk. Understanding the three primary variants is essential for accurate risk assessment.

Blanket Prohibitions

The most restrictive form flatly prohibits assignment without exception. Language such as "Neither party may assign this Agreement under any circumstances" leaves no room for consent or negotiation. These clauses are relatively uncommon in negotiated commercial agreements but appear frequently in form contracts and adhesion agreements. When they surface in material contracts, they require careful attention to whether the contemplated transaction structure constitutes an "assignment" under applicable law.

Consent-Required Provisions

The most common variant permits assignment with the other party's prior written consent. The critical sub-question is whether consent may be withheld at the counterparty's sole discretion or only on a "reasonable" basis. A clause requiring consent "not to be unreasonably withheld" gives the assignor significantly more leverage than one granting the counterparty absolute discretion. During diligence, flagging this distinction across hundreds of contracts can materially affect the consent solicitation strategy and timeline.

Change of Control Triggers

Some anti-assignment clauses explicitly address changes of control, capturing indirect transfers that might otherwise fall outside a traditional "assignment" analysis. Language such as "any change in the controlling ownership of a party shall be deemed an assignment" extends the restriction to stock acquisitions and mergers that do not involve a direct contractual assignment. These provisions are particularly significant in private equity transactions where the operating entity may remain the same but the ultimate ownership changes.

Does a Merger Constitute an Assignment?

This is one of the most frequently litigated questions at the intersection of contract law and M&A. The answer depends on three factors: the clause language, the governing law, and the transaction structure.

Clause language matters most. A provision that restricts "assignment by operation of law" or "any change of control, whether direct or indirect" is far more likely to capture a merger than one that simply prohibits "assignment" without further elaboration.

Governing law creates divergence. Many U.S. jurisdictions follow the rule that a merger by operation of law does not constitute an "assignment" unless the contract language specifically says otherwise. Delaware, where many target entities are organized, generally follows this principle. However, the analysis varies by state, and some jurisdictions take a broader view. International contracts add another layer of complexity.

Transaction structure can be a lever. A reverse triangular merger, where the target survives as a subsidiary of the acquirer, may avoid triggering assignment clauses that a forward merger or asset purchase would activate. Deal counsel frequently structure transactions specifically to navigate the anti-assignment landscape in the target's contract portfolio.

Practical Implications for Deal Teams

The operational impact of anti-assignment clauses extends well beyond legal risk. They affect deal timeline, purchase price, and post-closing integration.

Consent solicitation takes time. When material contracts require counterparty consent, the consent process can add weeks or months to the deal timeline. Counterparties may use consent requests as leverage to renegotiate pricing, service levels, or other terms. Identifying which contracts require consent, and prioritizing them by materiality, must happen early in diligence.

Purchase price adjustments. Contracts that cannot be assigned or that carry significant consent risk may warrant purchase price adjustments. A customer contract worth $5 million annually with a blanket prohibition on assignment represents a different risk profile than one with a consent-required clause and a cooperative counterparty.

Post-closing risk allocation. The purchase agreement should address what happens when consent is not obtained before closing. Interim operating arrangements, efforts covenants (reasonable efforts, best efforts, commercially reasonable efforts), and indemnification for lost contracts are all standard mechanisms, but they require accurate identification of the at-risk contracts during diligence.

Scaling Assignment Clause Review Across a Data Room

A typical mid-market data room contains hundreds of commercial agreements, each with its own assignment provision. Manually reviewing every contract for assignment restrictions, categorizing each clause by type, and building a risk matrix is precisely the kind of high-volume, pattern-recognition work that consumes associate hours without requiring deep legal judgment on each individual contract.

AI-powered contract review tools can extract and categorize anti-assignment provisions across an entire data room simultaneously. Instead of reading 300 contracts to find the 15 with problematic assignment language, deal teams can work from a structured extraction that identifies every assignment clause, flags the variant type, notes whether consent can be unreasonably withheld, and highlights change of control triggers. This allows attorneys to spend their time on the contracts that actually require judgment rather than the contracts that simply require reading.

The combination of automated clause extraction with attorney oversight is particularly effective for assignment clauses because the risk is binary and high-impact. You either identified the restriction before signing or you did not. There is no partial credit.

Structuring Around Assignment Restrictions

When diligence reveals problematic anti-assignment clauses, deal teams have several structural options.

Reverse triangular mergers preserve the target entity as a surviving subsidiary, potentially avoiding "assignment" triggers in contracts that do not have change of control language. This is the most common structural solution.

Asset purchases with assumption agreements allow selective assumption of contracts, but they generally constitute an "assignment" under most contract law frameworks, requiring counterparty consent for restricted contracts.

Novation agreements replace the original contract with a new agreement between the counterparty and the acquirer. These are most practical for a small number of high-value contracts where the counterparty relationship is strong.

Pre-closing consent solicitation addresses the issue directly by obtaining counterparty waivers before the deal closes. The risk is that counterparties may demand concessions, refuse consent, or use the request as an opportunity to terminate.

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