The employees buying their veterinary group had to rebuild the numbers first

The situation

Faisal had been the veterinary group's accountant for eleven years by the time Doris, its founder, decided it was time to retire. Doris had trained as a veterinarian and built the practice from a single clinic into a group of four locations across Stratford and the surrounding area, and over the years she had come to trust Faisal's judgment on the business side of things more than anyone else's, including her own. When she started thinking seriously about who should take the practice over, an outside sale to a larger veterinary consolidator felt wrong to her, and she said as much to Faisal directly, more than once, over the years they had worked together.

What Doris wanted instead was for the practice to stay with the people who had built it alongside her: the veterinarians, technicians, and support staff who had been there for years. Faisal, who understood the structure better than anyone, suggested an employee ownership trust, an arrangement that would let the staff collectively acquire the business over time, funded partly through the trust's own borrowing and partly through deferred payments to Doris herself. Cynthia, the group's longtime office manager and the person who had actually kept the practice's books for most of its history, was brought in early as the trust's other key representative, since she knew where every record in the practice actually lived.

The deal that took shape valued the group in the mid-thirty to low-fifty million dollar range, with a structure that depended heavily on getting the closing mechanics right: how much cash and debt the practice actually carried on the day ownership changed hands would determine, dollar for dollar, how much the trust owed and how much Doris received. That kind of purchase price adjustment is standard in transactions of this size, and it usually runs smoothly because the target's books are in reasonably good order.

The relationship between Faisal, Doris, and Cynthia was close, built over more than a decade of working together, and everyone involved assumed that closeness would make the final mechanics simple. It did not turn out that way, because the group's debt records, going back through two refinancings and a period when the practice had grown quickly, were nowhere near as complete as anyone expected.

Faisal, in particular, had believed his eleven years of familiarity with the practice's finances meant he already understood its liabilities well enough that formal reconstruction would be a formality rather than real work. Doris trusted that belief too, since it was Faisal's numbers she had relied on for over a decade of ordinary decision-making. Neither of them treated the transition to a formal purchase agreement, with its precise definitions and its dependence on documents rather than institutional memory, as a meaningfully different exercise until the gap in the records actually surfaced partway through drafting.

The complication

The purchase agreement defined net debt in fairly standard terms: outstanding loans, capital lease obligations, and certain debt-like items such as deferred rent and unpaid taxes, all netted against cash on hand at closing. The number that figure produced would adjust the purchase price up or down from the base valuation the parties had agreed. In a well-documented business, calculating it is largely mechanical. In this one, it was not, because several of the underlying loan and lease documents from the practice's earlier years could not be located.

The group had refinanced its equipment and premises debt twice over the previous eight years, once when it opened its third location and again when interest rates shifted favourably. Each refinancing had, in effect, replaced older debt with newer arrangements, and the original documentation from the earlier rounds had not been carefully preserved. Cynthia, who had managed the books through both refinancings, remembered the substance of the arrangements but did not have complete paperwork for either one. Some records existed only as bank correspondence rather than formal agreements. A capital lease covering diagnostic equipment at the second location had apparently been renegotiated informally at some point, with no signed amendment on file that either side could find.

This mattered because Doris's side and Faisal's side disagreed, in good faith, about how several of these obligations should be characterized. Doris's advisors argued that the renegotiated equipment lease should be treated as an operating expense rather than debt, which would reduce the net debt figure and increase what the trust owed her. Faisal's side argued that the original lease terms, before the informal renegotiation, were the correct baseline, which would increase net debt and reduce the purchase price. Without the actual documents, both positions were defensible and neither could be proven.

The gap threatened to delay closing indefinitely, since neither side could simply assert its preferred number without support, and the trust's financing was contingent on a closing date that could not slip too far without triggering its own renegotiation with its lender.

What we did

1. Catalogued exactly what was missing. We worked with Cynthia to build a complete inventory of every debt and lease obligation referenced anywhere in the practice's records, then flagged which ones lacked supporting documentation, which turned a vague dispute into a specific, bounded list of six items requiring resolution. Naming the problem precisely, rather than treating it as a general concern about missing paperwork, let both sides negotiate over concrete items instead of arguing past each other about how serious the gap really was.
2. Reconstructed the equipment lease history from secondary sources. For the diagnostic equipment lease at the centre of the dispute, we pulled payment records from the practice's bank statements going back to the original term, which showed the actual payment pattern even without the signed amendment, and that pattern supported the original terms rather than the informally renegotiated ones. Bank records could not replace a missing signed document entirely, but a consistent payment pattern over several years gave both sides something concrete to argue from instead of competing recollections.
3. Obtained confirmation directly from the equipment lessor. Rather than rely on internal records alone, we contacted the leasing company directly and requested its own file, which included a payment schedule consistent with our reconstruction and gave both sides a neutral third-party source to rely on. A record kept by a party with no stake in the outcome carried more weight in the negotiation than anything either side could have produced from its own files, and it moved the dispute toward resolution faster than further argument would have.
4. Separated resolved items from disputed ones to keep the deal moving. Of the six flagged items, four were resolved quickly once bank records were checked. We isolated the two genuinely disputed items, the equipment lease and a smaller deferred rent question, so the rest of the closing mechanics could proceed without waiting on them. Letting the resolved majority move forward kept momentum on the deal and kept the two remaining disputes from holding the entire closing hostage while they were worked through properly.
5. Proposed a negotiated split rather than continued advocacy. With the lessor's records supporting a middle position between the two sides' original claims, we recommended Faisal's side accept a net debt figure between the two competing calculations rather than continue arguing for the higher number, given the cost and delay further dispute would cause the trust's financing timeline. Recommending compromise, rather than pressing an advantage the evidence only partly supported, protected the closing timeline the trust's own lender was watching closely.
6. Documented the resolution formally in an amendment to the purchase agreement. We drafted a specific schedule setting out the agreed treatment of each of the six items, so the closing net debt calculation would be unambiguous and not subject to later dispute once ownership actually changed hands. Reducing the resolution to a signed schedule, rather than leaving it as an informal understanding between people who trusted each other, meant the agreement would hold even if that trust were ever tested later.
7. Coordinated the trust's financing timeline against the revised closing date. Once the net debt figure was settled, we worked with the trust's lender to confirm the short delay in closing would not disrupt its financing commitment, which required updated documentation but no renegotiation of terms. Confirming this directly with the lender, rather than assuming the delay would be absorbed without incident, removed the last piece of uncertainty standing between the settled dispute and an actual closing date.

The outcome

Closing proceeded roughly five weeks later than originally scheduled, on a net debt figure that fell between what Faisal's side and Doris's side had each originally argued for. The final purchase price the trust paid was slightly lower than the base valuation the parties had agreed before the debt dispute surfaced, reflecting the portion of the disputed items that were resolved in the trust's favour, while Doris's side retained the portion resolved the other way.

Neither side got its full position. Doris accepted a lower net proceeds figure than her advisors had initially argued for, and the trust accepted that the equipment lease dispute would not fully resolve in its favour either, since the lessor's records supported a middle position rather than either side's original claim outright. The five-week delay also meant Doris continued running day-to-day decisions at the practice longer than she had planned, which she had not budgeted for emotionally, having already begun preparing to step back.

The employee ownership trust closed on schedule for its financing and the practice transferred to its new employee ownership structure without disrupting client care at any of the four locations during the transition. Faisal and Cynthia have since put in place a standing practice of preserving original loan and lease documentation through any future refinancing, specifically because of how much time the missing paperwork cost everyone in this transaction.

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