Published: April 13, 2026
Author: Wyatt Phillips, Partner
The Number on the Term Sheet Isn’t the Whole Story…
Every owner who has been through a sale remembers the headline number. That’s natural. It’s the first thing you tell your spouse, your accountant, your golf buddy.
But the purchase price is just the starting point. How much of it you actually keep, how quickly you receive it, and how much risk you carry after closing, now that depends on everything else in the deal. Here are ten factors worth understanding before you sign anything.
1. How you get paid (“The Consideration”)
Cash at closing is clean. Stock in the acquiring company is not. If a meaningful portion of your deal is in the buyer’s equity, your outcome is now tied to their future performance, which is largely out of your hands. Seller notes add another layer: the interest rate, repayment schedule, and what happens if the buyer defaults all matter enormously. A deal at a lower headline number paid fully in cash can easily outperform a higher number paid in a mix of stock and seller financing.
Say you own an HVAC services company in Calgary and you receive two offers. One is $8M all cash. The other is $10M, but $3M of it is in the buyer’s shares and $1M is a seller note paid over three years. The second number sounds better. It probably isn’t.
2. Purchase price adjustments
Most deals include a mechanism that adjusts the final price based on the state of the business between signing and closing. Working capital targets are the most common. If the business performs differently than expected during that window, the price moves. Understanding the formula, and its limits, is critical.
You own a food distribution business in Ontario. You sign a deal in October and close in January. If your receivables drop over that period because a few large customers paid early, the buyer could argue your working capital came in below target and reduce the purchase price accordingly. A few poorly defined terms in that clause can cost you hundreds of thousands of dollars.
3. Earn-outs
An earn-out is a payment tied to future performance milestones. Buyers use them to bridge a valuation gap when they are uncertain about what the business will do post-sale. In practice, they are one of the most common sources of disputes and litigation after closing. The measurement criteria, the timeframe, and who controls the decisions that affect those metrics all create room for conflict. The best protection against a contentious earn-out is having predictable, well-documented revenue and profits before you go to market.
You run a mid-sized landscaping company in the GTA with strong seasonality. The buyer offers you $2M upfront and another $1M if revenue hits a certain threshold in year two. Sounds reasonable until they restructure the sales territory, bring pricing decisions in-house, and slow down on hiring. You miss the target through no fault of your own, and that $1M never comes.
4. Taxes
The difference between an asset sale and a stock sale can cost or save you millions in after-tax proceeds. The structure of the deal matters as much as the price. Get a qualified tax advisor involved early, not after you have a signed letter of intent.
In Canada, if you qualify for the Lifetime Capital Gains Exemption, a share sale could shelter over $1M in gains from tax entirely. Most buyers prefer asset deals for their own tax reasons. That tension is negotiable, but only if you understand it going in. An owner who defaults to whatever structure the buyer proposes can leave a significant amount of money on the table.
5. Escrow
Buyers typically hold back a portion of the purchase price in escrow for a set period after closing to cover potential claims. The amount held and the duration both affect how much money you actually have access to and when. Smaller escrows held for shorter periods are almost always better for sellers.
You sell your BC-based engineering firm for $6M. The buyer holds $600,000 in escrow for 18 months. That money sits in a lawyer’s trust account while the buyer looks for anything to claim against it. Pushing for a shorter holdback period and a lower escrow amount is a negotiation worth having before you get to closing.
6. Indemnification
Indemnification clauses define what you are on the hook for after the deal closes. They can cover breaches of your representations and warranties, undisclosed liabilities, taxes, and environmental issues, among other things. The dollar cap on your exposure and the time period it applies to are negotiable. Most sellers do not push hard enough on these terms.
You sold your manufacturing business in Hamilton and two years later the buyer discovers a pre-existing environmental issue on the property. Depending on how the indemnification clause was written, you could be responsible for cleanup costs that far exceed what you had in escrow. This is the kind of clause that feels like boilerplate until it isn’t.
7. Employment matters
Non-compete and non-solicitation agreements are standard in most transactions, but the scope and duration vary significantly. Key employees may be offered retention packages or may be let go. Severance costs and who pays them should be addressed before closing, not after.
You own a staffing company in Edmonton and your two top account managers are critical to client retention. The buyer wants them under contract before closing. If those retention bonuses are not negotiated as part of the deal, they can come out of your proceeds at the last minute. On top of that, if the buyer decides not to keep certain employees, Canadian employment law requires proper notice or severance, and someone has to pay for that.
8. Third-party approvals
Some deals require approvals from lenders, boards, minority shareholders, or regulators. These can delay or derail a closing. If your business operates in a regulated industry, this deserves careful attention early in the process.
You own a small telecom services business in Quebec. Your largest contract has a change-of-control clause requiring client consent before the deal can close. If that client takes two months to respond, or decides not to consent at all, it can materially affect the deal. Identifying these provisions early gives you time to manage them properly.
9. Transaction fees
Legal, accounting, and due diligence costs are real and they come out of your proceeds. In lower middle market deals, these fees can represent a meaningful percentage of the total transaction. Budget for them honestly and factor them into your net number from the start.
On a $5M transaction, it is not unusual for a seller in Canada to spend $150,000 to $300,000 on legal fees, accounting, and advisory costs by the time the deal closes. That is money you need to plan for. An owner who only thinks about the gross purchase price often gets a surprise when they see the net.
10. Deal protection provisions
Buyers often request break-up fees, no-shop clauses, and material adverse change provisions. These are designed to protect the buyer’s position. They can also limit your flexibility if the deal gets complicated or if a better offer surfaces. Know what you are agreeing to.
You are a Saskatchewan-based owner who signs a letter of intent with one buyer and agrees to a 60-day exclusivity period. Three weeks in, a strategic buyer reaches out with a significantly better offer. Because of the no-shop clause you signed, you cannot engage with them. By the time exclusivity expires, the second buyer has moved on. Understanding what you are committing to before you sign an LOI matters.
The purchase price gets the attention. These ten items determine the outcome. If you are thinking about a sale and want to talk through any of them, we are happy to have that conversation. Book a confidential strategy call with our partners.