The License Agreement You Signed Years Ago Just Became a Negotiating Chip
When a company enters a sale process, the leverage embedded in its existing agreements doesn't stay where it was left. Counterparties who had no particular power over the business yesterday can suddenly have meaningful influence over the closing, not because anything changed in the agreement, not because they acquired new rights, but because the context around the agreement changed. And in M&A, context is everything.
This dynamic is most visible in license agreements, and it's worth understanding before you're in the middle of a transaction.
Two Deals, Same Document
When a license agreement is negotiated, the power dynamic is usually clear. Your company controls the IP. The counterparty wants access to it. The terms reflect that: scope, duration, exclusivity parameters, and assignment conditions, all negotiated from a position of relative strength. Even in a collegial negotiation, you are the one with something the other side wants.
Fast forward to a sale process. The same agreement is now sitting in a diligence data room, and a buyer's counsel is reading it with a very different set of questions: What does this limit? What does it require? What can't be transferred without someone else's agreement? Buried in provisions negotiated from a position of strength, there may be language that has quietly shifted leverage to the counterparty, not when the agreement was signed, but now, in this context, with these stakes. The counterparty hasn't done anything. They didn't negotiate for this position, didn't anticipate it, and may not even know they have it. They're simply holding an agreement that, in the current context, gives them something you need.
How Leverage Moves
The clearest example is assignment and change-of-control language. Many license agreements require consent to assign or prohibit transfer upon a change of control, provisions that at signing probably felt like reasonable protective measures, if they registered at all. In a transaction, they become closing conditions. You have to go back to a counterparty who now knows a deal is pending, knows your timeline, and has every reason to extract value from a conversation they never asked to have. The leverage you held when the agreement was signed has now shifted to them — without a single word in the agreement changing.
Exclusivity provisions work similarly, though more subtly. An exclusive license granted to an early customer or strategic partner may have seemed like a sensible commercial concession at the time, a way to close a deal or get a product into market. In diligence, a buyer isn't evaluating whether that exclusivity made sense then. They're evaluating whether it constrains the business they're about to acquire. If it does, the counterparty holding that exclusivity has indirect influence over the transaction, whether they know it or not. Their continued presence in the agreement affects how a buyer thinks about value, and that effect doesn't require them to do anything at all.
Parked IP creates a quieter version of the same problem. A licensee who holds rights with no obligation to use them, no performance requirements, no commercialization milestones, no reversion triggers, has a passive form of leverage. They're not exercising the rights, but they're sitting on them. In diligence, that raises a question buyers don't like: is this asset fully available, or is it encumbered by a relationship that produces no value and can't easily be unwound? The leverage here isn't active. It's the power of incumbency in an agreement that should have had an exit ramp and doesn't.
Ownership ambiguity around improvements and derivative works operates differently, not as leverage held by a specific counterparty, but as uncertainty built into the structure of the agreement itself. Technology evolves after signing. If it isn't clear who owns the IP as it has developed, the buyer can't be confident in what they're acquiring. That ambiguity becomes a variable in the negotiation: a price adjustment, an escrow, a representation and warranty dispute that didn't have to happen.
The Leverage Was Always There
What makes this dynamic hard to see coming is that none of these provisions are unusual. They appear, in various forms, in many otherwise well-drafted agreements. And the leverage they create didn't materialize at the moment of the transaction. It was embedded in the agreement from the beginning. The transaction simply revealed it.
That's the part that's easy to miss at the time of signing. When you're negotiating a license to close a deal or land a key customer, you're solving for the present. The counterparty doesn't feel like a future obstacle but a partner. The assignment clause doesn't feel like a future closing condition but standard protective language. The exclusivity carve-out doesn't feel like a constraint on future value but a reasonable commercial concession to get the deal done.
What almost never happens in that moment is a second analysis: how does this agreement read if someone is trying to buy this company three, five, or seven years from now? What does this provision do when the context is a closing timeline instead of a commercial relationship? That analysis requires imagining a future transaction from inside a present negotiation, and the pressure of the current deal almost always crowds it out. The result is that leverage gets baked into agreements that neither party fully intended to create, and it sits there, dormant, until a transaction brings it to the surface.
What This Means Practically
The goal isn't to negotiate every license agreement as if a sale is imminent. Most of the time, it isn't, and over-engineering commercial agreements in anticipation of an exit that may never happen creates its own problems. The goal is to recognize that agreements touching core IP carry embedded leverage that can shift depending on who needs what and when.
Assignment and change-of-control language deserves attention because it creates consent rights that can become closing conditions. Exclusivity scope and duration deserve scrutiny because they can constrain value even when the underlying relationship is functioning well. Use and performance obligations matter because their absence creates parked rights that are difficult to recover. And ownership language around improvements and jointly developed technology compounds in importance over time as the IP evolves and the gap between what was written and what was built grows wider.
None of this requires over-engineering. It requires clarity about what the agreement actually does, and enough foresight to consider what it might do under different circumstances, with different stakes, and a buyer's counsel reading it from the other side of the table.
Final Thought
The license agreement you negotiated from a position of strength can become the agreement someone else uses to complicate your closing. Not through bad faith. Not through changed terms. Simply because the context shifted, and with it, the leverage.
By the time a sale process starts, you're no longer just managing the relationship the license was written to govern. You're managing what the agreement does to your deal.
That's worth knowing before you're in the room.
