Commercial clarity: top five M&A tips from a commercial perspective

A clear understanding of a target company’s business and the commercial environment in which it operates is fundamental to the success of any merger or acquisition (M&A). Commercial considerations often go directly to the heart of valuation – from the strength and structure of the target’s relationships with suppliers, distributors and customers, to the way it protects and leverages its assets and intellectual property, and its compliance with the legal and regulatory framework governing its operations.

In this briefing, we outline five key commercial considerations for both sellers and buyers involved in an M&A transaction.

1. Understand the business model and the market

A comprehensive understanding of the company's business model and the market in which it operates is critical. This underpins any assessment of value – for example, revenue streams, customer base and key supplier relationships – as well as the risk profile, including historic and future compliance with applicable laws and regulations and potential competition.

Sellers should present a clear and coherent explanation of their business model, emphasising strengths while being transparent about any vulnerabilities.

Buyers should undertake a detailed analysis of the business model and ensure they are familiar with the relevant market to: (a) confirm the proposed transaction aligns with their strategic objectives; (b) identify risks and opportunities; and (c) shape their approach to due diligence.

2. Review customer and supplier relationships

Solid customer and supplier relationships are fundamental to the stability and long-term success of any business. Understanding these relationships through due diligence is therefore essential to forming an accurate picture of the target’s operations.

In practice, even mature businesses often have key customer or supplier arrangements that are undocumented, unsigned or technically expired. Where contracts are still 'live', they may lack sufficient detail or robustness or contain unusual or onerous provisions that present commercial or legal risk.

Sellers should ensure these relationships are clearly documented prior to any sale process. This includes identifying and collating key contracts and information on the nature, history and strategic significance of relationships with major customers and suppliers.

Buyers should evaluate both the quality and stability of these relationships, considering: (a) contract terms, including duration and termination rights for both parties; (b) historic, ongoing or anticipated disputes; and (c) any legal or regulatory risks, such as compliance with consumer or competition law.

3. Identify change of control, assignment and termination provisions

Some agreements include provisions requiring the target to obtain the prior written consent of a counterparty (for example, a supplier or customer) in the event of a change of control (ie a share sale) or an assignment (ie an asset sale). Others may give the counterparty the right to terminate the agreement altogether if such an event occurs.

These provisions can have a significant impact on a transaction, because of both the time required to secure consents (where needed) and the potential uncertainty around whether they will be granted.

Sellers should review all relevant contracts early in the process to identify any change of control, assignment or termination clauses, address any issues proactively and keep the buyer informed throughout.

Buyers should scrutinise these provisions during due diligence and raise any concerns with the seller at an early stage.

4. Assess the risk of potential liabilities

Understanding a target's liability exposure is crucial to avoiding unexpected legal or financial burdens post‑completion. This requires a careful review of warranties, indemnities and other contractual provisions that may give rise to future liabilities, any instances of non‑compliance with applicable laws and regulations and any ongoing, threatened or anticipated litigation.

In practice, liabilities may arise from unpaid sums under a contract, onerous indemnity or liability provisions or historic breaches of contract or regulatory requirements.

Sellers should disclose all known and anticipated liabilities as fully as possible.

Buyers should conduct thorough due diligence to identify potential liabilities and negotiate appropriate warranties and indemnities to mitigate any identified risks.

5. Take specialist advice

Every business and market is different, and a 'one size fits all' approach to due diligence is rarely appropriate. Specialist advice is often advisable, for example in relation to regulatory compliance (including industry-specific regulations), financial due diligence (such as accounting and tax analysis), and technical due diligence (which is often carried out by experts such as scientists, patent attorneys or other relevant professionals).

Sellers should be open, responsive and prepared to engage constructively with the buyer’s due diligence process.

Buyers should appoint specialist advisers where needed to ensure they can undertake an appropriate level of due diligence and make an informed decision about whether to proceed with the transaction.

For further insights on M&A transactions, read more here.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, March 2026