Buying or Selling a Business in Ontario: How Deals Actually Come Together — and Where They Break
A business sale is rarely a single transaction.
It is a sequence of decisions, each of which affects the outcome of the next.
Structure, timing, allocation of risk, and negotiation all interact. What appears straightforward at the outset becomes more complex as the process unfolds.
Most issues do not arise from any one step. They arise from how those steps connect.
The Structure Comes First
Every transaction begins with structure.
A share purchase transfers ownership of the company itself. An asset purchase transfers selected assets and liabilities.
The distinction is not technical. It determines what is being acquired, what risks are assumed, and how the transaction is taxed.
Once that choice is made, everything else follows from it.
The Process Is Sequential, Not Linear
Transactions are often described as a series of steps.
In practice, those steps overlap.
A letter of intent sets expectations before full diligence is complete. Due diligence informs negotiation of definitive agreements. Representations and warranties allocate risk based on what is discovered.
Each stage feeds into the next.
Where Deals Slow Down
Most transactions encounter friction in predictable places.
Initial expectations set in the letter of intent may not align with what diligence reveals. Information may be incomplete or inconsistent. Risk allocation may shift as issues are identified.
At that point, the transaction is no longer about price alone.
Risk Is Allocated, Not Eliminated
No transaction removes risk.
It reallocates it.
Representations and warranties define what is being promised. Indemnities define what happens if those promises are not met. Earnouts shift part of the purchase price into the future.
Each mechanism addresses uncertainty in a different way.
Preparation Determines Outcome
The condition of the business before going to market affects the transaction.
Incomplete records, unclear ownership, or inconsistent contracts do not prevent a deal. They change its terms.
Due diligence does not create issues. It reveals them.
The Practical Question
The relevant question is not how to complete a transaction.
It is how the structure, process, and documentation align to produce a result that holds after closing.
That depends on decisions made well before the final agreement is signed.
Where This Leads
Most transactions reach a point where assumptions are tested.
Price, structure, and risk allocation are revisited. At that stage, leverage depends on preparation and clarity.
The transaction reflects not just the business, but how well it has been organized for transfer.
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