Buying Their First Business Meant Buying It Two Ways

The situation

Tharshini, an electrician, and Zofia, a paramedic, had spent two years talking about leaving employment behind and owning something together. Neither had bought a business before. What they found, through a broker, was a Vaughan-based appliance repair and installation company owned by Selam, who had built it over almost two decades and was ready to retire. The business serviced household appliances for homeowners across the region and, more valuably, held an authorized repair contract with a major appliance manufacturer that referred warranty repair work in the area exclusively to Selam's company.

The agreed purchase price was roughly $1,150,000, reflecting the company's service vans, tools and inventory, its residential client base, its trained technicians, and above all that manufacturer relationship, which alone accounted for close to a third of annual revenue and came with none of the marketing cost of building a client base from scratch. Tharshini and Zofia financed the purchase with savings and a loan secured in part against their home, and they came to us once the price was agreed in principle, wanting the deal papered correctly the first time since neither of them had any experience to fall back on if something went wrong.

The problem

Our starting point, as it usually is for a small operating business like this one, was a straightforward asset purchase. Buying assets rather than shares lets a buyer choose exactly what it acquires — the vans, the tools, the inventory, the client list, the trained staff it wants to keep — and leave behind what it does not want, including any liabilities tied to the seller's past conduct: old disputes with customers, unpaid supplier accounts, or claims that simply have not surfaced yet. For first-time buyers using a large share of their own savings, that protection mattered.

Reviewing the manufacturer agreement changed the plan. Like most authorized-dealer and warranty-service contracts, it named Selam's operating company specifically as the authorized repairer for the territory, and it barred assignment to a new owner without the manufacturer's written consent — with the added complication that a change of authorized repairer in that territory could trigger the manufacturer's right to re-tender the relationship altogether rather than simply transfer it. An asset purchase would have required exactly that: an assignment of the agreement from Selam's company to Tharshini and Zofia's new company, handing the manufacturer an opening to open the territory to other applicants at the worst possible moment, mid-transaction, with closing dates already agreed and financing already arranged.

There was no guarantee the manufacturer would say no. But there was no guarantee it would say yes either, and the manufacturer's regional office had a known pattern of using ownership changes as a chance to shop the territory to competing repair shops before renewing. Losing that one contract would have meant losing roughly a third of the business's revenue and a meaningful part of what Tharshini and Zofia were actually paying for. It also would have left them personally exposed on a loan sized for a business that, without the contract, was worth considerably less than what they had agreed to pay.

One detail worked in their favour. Selam, on the advice of an accountant years earlier, had incorporated a separate company to hold the manufacturer agreement and the small parts inventory tied to it, keeping that relationship administratively and financially separate from the day-to-day residential repair operation. That separation, originally done for bookkeeping reasons that had nothing to do with a future sale, gave us a structure to build on.

What we did

1. Reviewed the manufacturer agreement and every other material contract before the purchase agreement was drafted. Checking for assignment and change-of-control restrictions early meant the anti-assignment clause was found while there was still room to design around it, rather than discovered during closing week when buyers have the least leverage and the least time to react.
2. Proposed splitting the transaction into two linked deals. We recommended Tharshini and Zofia buy the numbered company holding the manufacturer agreement by way of a share purchase, since a change in that company's shareholders would not touch the agreement itself, which would remain in force with the same corporate party on the other side of it. The residential repair operation — the vans, tools, inventory and general client base, along with the liabilities that come with a seller's operating history — would still be bought by asset purchase, keeping the liability protection where it mattered most.
3. Confirmed the clause turned on assignment, not on a change of control. Some supplier and dealer agreements are drafted to treat a change in who owns the corporate party as equivalent to an assignment, which would have defeated the whole structure. This one restricted assignment of the agreement itself and said nothing about a change in the numbered company's shareholders. We confirmed that reading against the full text of the agreement before relying on it, since a mistaken reading would have recreated the exact risk the structure was meant to avoid.
4. Allocated the purchase price between the two pieces. Of the agreed $1,150,000, roughly $850,000 was allocated to the asset purchase of the operating business — its vans, tools, inventory, goodwill and client relationships — and roughly $300,000 to the shares of the numbered company holding the manufacturer agreement, together making up the full price. The split had tax consequences for both sides, since asset and share consideration are treated differently, and it was negotiated as its own point rather than assumed.
5. Drafted both agreements to close as one transaction. An asset purchase agreement and a share purchase agreement were prepared in parallel, with matching conditions and a shared closing date, so that neither could complete without the other. Tharshini and Zofia signed personal guarantees tied to their financing, and we made sure those guarantees referenced the correct entity for each half of the deal, since a guarantee drafted against the wrong company would have been worthless if it were ever called on.
6. Managed the manufacturer relationship without inviting a renegotiation. Because the agreement was not being assigned, no consent was legally required, and we advised against seeking any — asking for permission that was not needed would have handed the manufacturer's regional office exactly the opening it might otherwise not have taken. Selam instead introduced Tharshini and Zofia to the regional account manager as the incoming owners of the numbered company, a courtesy conversation rather than a request for approval, timed for after the share purchase had already closed.

The outcome

The deal closed on schedule, in two parts that functioned as one. Tharshini and Zofia became the owners of the residential repair operation by asset purchase, taking the vans, tools, inventory and client relationships they had bargained for, while leaving Selam's company to wind down with whatever pre-closing liabilities it carried. At the same time, they became the sole shareholders of the numbered company holding the manufacturer agreement, which continued exactly as written — same territory, same referral volume, same terms — because it had never been assigned or touched in a way that could trigger re-tendering.

The manufacturer's regional office learned of the change only after it was already complete, through the courtesy introduction rather than a consent request, and raised no objection because none was required and no renegotiation was invited. Within a few months, Tharshini and Zofia had folded the manufacturer's referral work into their own scheduling, and the revenue tied to that contract — the part of the deal that had been most at risk of unravelling — carried on without interruption.

For two first-time buyers who had put personal savings and a share of their home's equity behind the purchase, the outcome mattered beyond the legal mechanics. A deal that looked like a single straightforward asset purchase at the outset carried a real risk of losing a third of the business's value the moment the manufacturer learned of the sale, and that risk was found and designed around before it ever reached the manufacturer's desk. Nothing about the manufacturer relationship needed to be renegotiated, defended or replaced, because the structure never gave anyone a reason to reopen it.

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