Georgina Surgeon's $6.2M Clinic Sale: Auditing Every Closing Line

The situation

Rejean spent close to twenty years building a diagnostic imaging and day-surgery clinic business in Georgina, growing it from a single suite to a multi-location operation with imaging equipment, a trained clinical and administrative staff, and long-term leases on its premises. At sixty-one, he was ready to retire from active practice and had agreed, after a lengthy negotiation, to sell the business to a buyer group for a purchase price of roughly $6,200,000, structured as a purchase of shares in the corporation that owned and operated the clinics.

His spouse, Luc, a specialist physician who had never held an ownership stake in the business but whose income and retirement plans were tied up in the sale proceeds, was closely involved in reviewing the numbers. The buyer's principal, Kajan, ran a small group that already owned several diagnostic clinics elsewhere in the province and intended to fold Rejean's operation into that network.

The purchase agreement had been negotiated by counsel on both sides months earlier and covered the major terms: price, closing date, employee retention commitments, and a working capital target the business was expected to have on hand at closing. What remained, as closing approached, was the unglamorous but financially consequential work of translating those contract terms into an actual closing statement — the document that calculates exactly how much money changes hands after every adjustment is applied.

What the closing review found

In a business sale, the purchase price on the agreement is rarely the amount that actually gets wired on closing day. The closing statement adjusts that headline number for a list of items: proration of property taxes and rent already paid by the seller for periods after closing, accrued but unpaid employee vacation pay and payroll obligations that transfer to the buyer, prepaid supplier contracts and equipment leases, and — in Rejean's case — a comparison between the business's actual working capital on closing day and the target working capital figure fixed in the agreement, with a dollar-for-dollar adjustment to the price if the actual number came in above or below that target.

The buyer's accounting team prepared the first draft of the closing statement, as is standard practice, and sent it over roughly ten days before the scheduled closing. On its face it looked reasonable: a modest downward adjustment reflecting a working capital shortfall, a small credit for prepaid property tax, and a line for accrued vacation pay owed to staff who would remain with the business after the sale.

Treadstone Law's team, retained to act for Rejean through the sale, treated the draft closing statement the same way it treats every closing statement on a transaction of this size: as a set of claims to be verified against source documents, not accepted on trust. Three problems surfaced on review. First, the working capital calculation used a snapshot of accounts receivable that was several weeks old and did not reflect roughly $40,000 in payments the clinic had since collected — money that belonged in the seller's favour but had been left out. Second, the accrued vacation pay figure had been calculated using each employee's current salary rather than their salary at the time the vacation was earned, overstating the liability being passed to the buyer by close to $30,000. Third, a prepaid equipment lease covering imaging equipment at one of the clinic locations had eighteen months remaining and roughly $65,000 in value still prepaid, but the draft statement had allocated only a partial credit for it, understating what the seller was owed by about $35,000.

None of these were the kind of errors that suggested bad faith on the buyer's side — closing statements are assembled quickly under deadline pressure by people working from templates and incomplete data, and errors run in both directions. But left uncorrected, the three items together would have reduced Rejean's proceeds by roughly $105,000 to $115,000 relative to what the underlying agreement actually called for.

What we did

1. Rebuilt the working capital calculation from source documents. Rather than accepting the buyer's summary figures, the team requested the underlying accounts receivable aging report, bank statements, and payables ledger as of the actual closing date, and recalculated the working capital position independently. The updated receivables collections alone accounted for roughly $40,000 of the discrepancy.
2. Cross-checked the vacation pay accrual against payroll records. Ontario's Employment Standards Act, 2000 sets out how vacation pay is calculated and accrues on an employee's earnings, and the agreement had specified that the accrual be calculated in a manner consistent with the business's normal payroll practice. The team obtained payroll records for each affected employee and recalculated the accrual using the correct salary figures, reducing the liability being deducted from Rejean's proceeds by close to $30,000.
3. Located and valued the prepaid equipment lease in full. The lease agreement and payment history for the imaging equipment were requested directly from the clinic's finance staff, confirmed against the lease provider's own statement, and used to recalculate the correct proration. This closed the remaining roughly $35,000 gap.
4. Prepared a line-by-line reconciliation for the buyer's counsel. Rather than simply disputing the total, the team sent a document showing each contested item, the source records supporting the correction, and the resulting revised figure — making it straightforward for the buyer's advisors to verify the numbers themselves rather than negotiate from a position of uncertainty.
5. Held the closing date while the statement was finalized. The corrections were substantive enough to require a short delay of a few business days rather than signing off on a rushed and inaccurate statement under deadline pressure, and the team coordinated with both sides' counsel to keep the delay brief and the closing on track.

The outcome

The buyer's accounting team reviewed the reconciliation, accepted all three corrections after verifying the supporting records, and an amended closing statement was issued within a few business days. The net effect was that Rejean's proceeds on closing were roughly $108,000 higher than they would have been under the original draft — money that had been his under the terms of the agreement all along, simply miscalculated in the paperwork rather than disputed on principle.

The sale closed on the revised date, with share proceeds flowing to Rejean and Luc as planned and the clinic business transitioning into Kajan's existing group without disruption to staff or ongoing patient care. Because the corrections were grounded in source documents rather than negotiating positions, there was no friction between the parties afterward — both sides' advisors treated the revised statement as simply the accurate one.

For Rejean, the episode underscored something that is easy to lose sight of after months of negotiating price and terms: a signed purchase agreement sets the rules, but the closing statement is where those rules get applied to real numbers, and real numbers are where errors creep in. The $108,000 recovered was not the product of hard bargaining — it was the product of checking arithmetic against source documents rather than accepting a summary at face value.

What you can learn from this