When a Supplier's Consent Almost Sank a Lindsay Sale

The situation

Marcia had started the business twelve years earlier, packaging preserves and sauces out of a rented unit outside Lindsay, using produce from the farm where she still worked part of the year. Andre, who had spent most of his career as a factory technician, joined as her operating partner once the company outgrew the original space and needed someone who understood industrial equipment. Neither of them drew much of a salary out of the business; most years they reinvested what it earned. On paper they were modest earners. On paper the company they had built was worth a great deal more.

By the time a mid-sized national food distributor made an offer to buy the company outright, it had grown to supply grocery chains across Central Ontario, with a transaction value that landed in the range of $5 million once inventory and equipment were factored in. The buyer wanted a clean acquisition of the shares — Marcia and Andre would exit, the company would keep its name and its staff, and the buyer would fold it into its existing distribution network. It looked, at first, like a straightforward deal.

What the review found

Our team was retained to act for Marcia and Andre on the sale, starting with the due diligence review that any competent buyer's counsel and seller's counsel run in parallel. Part of that review means reading every material contract the company depends on, not just for what it says about price and delivery, but for what it says about what happens if ownership changes.

The company's single largest supplier was a specialty packaging manufacturer run by Quang, who had supplied custom jars and lids to the business for nearly a decade under a long-term supply agreement. That agreement was central to the company's operations — Quang's packaging was tooled specifically to the company's production line, and switching suppliers on short notice was not realistic. Buried in the agreement's boilerplate was a clause requiring the supplier's written consent before the contract could be assigned, and defining a change of control of the company as an assignment for that purpose.

This mattered because the deal was structured as a share sale — the buyer would purchase Marcia and Andre's shares in the company, and the company itself, as the contracting party, would remain unchanged. Many people assume that a share sale sidesteps consent requirements entirely, since the legal entity holding the contract never actually changes hands. That assumption is only sometimes correct. A well-drafted change of control clause, like the one in Quang's contract, is written precisely to catch share sales too, because from the supplier's point of view, the entity they are dealing with tomorrow will answer to entirely different owners than it did yesterday. The consent requirement was real, and it was a condition the buyer's lawyers had also flagged as a closing condition — the deal could not close until Quang signed off.

What we did

1. Flagged the clause early, not at the closing table. The review surfaced the consent requirement more than two months before the target closing date, giving everyone time to manage it deliberately rather than scramble. Contract review that happens early in a deal timeline turns a potential closing-day crisis into a negotiation with room to breathe.
2. Approached Quang directly, with Marcia and Andre's relationship as the opening move. Rather than have the buyer's lawyers send a cold legal notice, we advised Marcia to have an initial conversation with Quang herself, given their years of working relationship, before any formal consent request went out. Relationships built over a decade of business are worth using when a contract asks for someone's discretionary agreement.
3. Prepared for the leverage problem before it appeared. A supplier who is asked for consent to a sale they had no part in negotiating quickly realizes they are holding something the deal cannot close without. We warned Marcia and Andre in advance that Quang was likely to treat the request as an opportunity to renegotiate supply terms, not simply a formality to be signed and returned.
4. That prediction proved accurate. Quang came back not with a signature, but with a list of demands: a longer minimum-term commitment from the buyer, an increase to the per-unit price the company paid for packaging, and a guarantee that Quang would remain the exclusive supplier for at least five years. Any one of those, on its own, was manageable. Together, they represented a meaningful ongoing cost that would follow the company past closing.
5. Negotiated the concession down to what the deal could absorb. We worked with the buyer's counsel to push back on the exclusivity term and the length of the commitment, while accepting a smaller price increase on packaging as the cost of getting the deal done. Neither side got everything it wanted from Quang, but a workable middle position emerged: a three-year minimum term, a modest but real per-unit increase, and no formal exclusivity, just a right of first refusal on future packaging changes.
6. Adjusted the purchase price to reflect the new cost. Because the higher ongoing packaging cost was a direct, quantifiable hit to the company's future margins, the buyer used it to justify a reduction to the purchase price of roughly $150,000 off the originally agreed figure. We negotiated that reduction down from the buyer's initial ask, but some price adjustment was unavoidable once the higher supply cost was locked in.
7. Got the consent in writing before closing, not as a closing-day promise. Verbal assurances from a supplier are not a substitute for an executed consent. We insisted the signed consent, incorporating the renegotiated supply terms, be delivered and reviewed before the closing date was confirmed, so there was no possibility of a last-minute refusal derailing the transaction after everything else was locked in.

The outcome

The sale closed roughly on schedule, with only a short delay to accommodate the supply term renegotiation. Marcia and Andre received consideration reduced by about $150,000 from the price they had originally agreed with the buyer — a real cost, and one that came from a source neither of them had thought to worry about when they signed the initial letter of intent. The company kept its packaging supplier, avoided the disruption of switching mid-transition, and the buyer accepted a three-year commitment rather than the five years and exclusivity Quang had first asked for.

It was not the clean, full-price exit Marcia and Andre had pictured. But it also was not the alternative: a deal that stalled at the closing condition, or one that collapsed outright because a $5 million transaction turned on the signature of a packaging supplier neither party had prioritized in early negotiations. Both sides gave something up. The buyer absorbed a higher ongoing cost of goods; Marcia and Andre absorbed a lower sale price; Quang secured better terms than the original contract had guaranteed. Everyone involved could point to a result they could live with, which is different from a result anyone would have chosen if the clause had not existed.

What you can learn from this