Licensing data during a sale process: interim covenants and buyer consent

The timing rule: before signing, between signing and closing, after closing#

The timing rule for licensing data during a sale process is that the closer the deal gets to closing, the less freedom the seller has. Before a purchase agreement is signed, the company can sign a license if it discloses it. After signing, interim operating covenants usually require buyer consent. After closing, the buyer's company decides.

A letter of intent can also carry binding conduct-of-business or exclusivity language, even when most of it is non-binding. Read the binding sections before assuming the company is free until signing.

Before signing: license if you choose, but disclose everything#

Before signing, a data license is a business decision the seller can make, provided it is disclosed. Once signed, it becomes a contract the buyer will read, and it may belong on the schedules for material contracts, intellectual property and privacy.

Buyers tend to ask the same diligence questions about a data license, so prepare the answers in one place before the data room opens.

A clean, time-limited, non-exclusive license can support the case that the company's records carry value. An exclusive or open-ended one can look like a constraint on the buyer's plans, which is why many sellers time any new license against the process calendar rather than sign in the middle of diligence.

• 1Is the license exclusive, and in which field of use?
• 2How long does it run, and may the licensee keep delivered copies after it ends?
• 3Which record families were licensed, and how were personal and confidential details removed?
• 4Does it terminate or require consent on a change of control?
• 5What payments remain, and are there refresh deliveries the company must still perform?

Between signing and closing: what interim covenants restrict#

Interim operating covenants usually require the seller to run the business in the ordinary course and to obtain buyer consent before entering into, amending or terminating material contracts, granting IP licenses or disposing of assets outside the ordinary course. A first-ever data license rarely fits the ordinary-course exception comfortably.

Consent standards vary. Some agreements say consent may not be unreasonably withheld, conditioned or delayed; others leave it to the buyer's discretion. Where antitrust review applies, counsel also keeps consent rights from turning into early buyer control of the business, which is one more reason the request should come from the seller and stay narrow.

If an inbound offer arrives in this window, the usual answer is to acknowledge it, keep conversations to metadata, and either seek consent or defer signing until after closing.

What a buyer consent request should cover#

A buyer consent request should give the buyer enough to say yes without reopening diligence. Send it in writing to the person named in the notices clause, and attach a short term summary rather than the full draft license.

Ask for consent in a form that also covers the license after closing, so the buyer's company is not surprised by an obligation it approved only in principle. Keep a signed copy of the consent with the license file.

• 1Supplier entity, record families and date range in scope.
• 2Exclusivity, term, field of use and any rights in delivered copies.
• 3Privacy preparation performed and what was excluded.
• 4Assignment and change-of-control terms, so the buyer knows what it inherits.
• 5Payment schedule and which party benefits from fees received before closing.
• 6Ongoing obligations, such as refresh deliveries or support.

Who keeps license fees received before closing?#

License fees received before closing go to whichever party the purchase price mechanism favors. In a completion accounts deal, cash on hand at closing usually flows through the closing statement. In a locked box deal, value moving out of the business after the locked box date is policed as leakage, while incoming cash generally stays in the company.

Fees due after closing generally belong to the company and therefore to the buyer. A seller who expects to share in them needs that written into the purchase agreement, for example through a price adjustment or an earnout definition that includes or excludes license revenue.

After closing: the license stays with the licensor#

After closing, an existing data license usually stays in place in a stock purchase, because the licensor entity is unchanged and only its owner differs. In an asset purchase, the license must be assigned to the buyer, which often needs the licensee's consent.

Check the change-of-control clause in every license. Some licensees want a right to terminate if a competitor acquires the supplier, and some suppliers want the same in reverse. Either right affects how the buyer values the contract, so surface it early.

Sellers who roll equity or hold an earnout keep an interest after closing. They should ask how the new owner will treat license revenue and preparation costs, because both can move the numbers their payout depends on.

Illustrative: an inbound offer arrives after signing#

Illustrative: a fictional PE-backed engineering firm, with project records in Deltek, Bluebeam markups and RFI and submittal logs, signs a purchase agreement with another sponsor. Shortly after, an AI developer asks to license its RFI and submittal history.

The operating partner pauses the conversation and checks the interim covenants, which require buyer consent for new IP licenses. The firm sends a short consent request describing a non-exclusive, time-limited license limited to internal project coordination records, with client deliverables excluded and a clean assignment clause.

Outcome: the buyer consents on condition that signing waits until after closing and that all payments go to the company. The scope and approvals are drafted during the interim period, and the new owner signs after closing.

How SourceX works with companies in a sale process#

SourceX asks at the fit check whether the company is in a sale process, because a process changes who must approve. The fit check collects metadata only, so nothing is shared while the company decides.

In the SourceX five-step transaction of Supply, Rights, Preparation, Approval and Delivery, buyer consent is handled in the Approval step alongside board and lender approvals. The SourceX Evidence Packet records release authorization, including any purchaser consent, so the new owner can see exactly what was licensed and on what terms.