Selling An IT Support Business Without Losing The Staff

The situation

Ari had spent eleven years building an IT support company in North York that served small and mid-sized businesses across the city, from routine helpdesk contracts to after-hours network monitoring. Herman, a full-time paramedic, had put in the original startup capital and stayed on as a silent partner, taking no salary but holding half the shares. By the time a buyer came forward, the company had fourteen employees, steady recurring revenue, and an offer on the table worth roughly $1.35 million.

The buyer, Wilson, ran a larger managed-services company and wanted to fold Ari and Herman's client base and technical staff into his existing operation. The deal itself moved quickly. Both sides agreed on price, on a modest holdback tied to client retention, and on a closing date about ten weeks out. The one item that kept stalling the negotiations was what would happen to the employees.

This was structured as an asset sale, meaning Wilson's company would buy the client contracts, equipment, and goodwill of the business rather than buying the shares of Ari and Herman's corporation. That distinction mattered more than either partner initially realized. In a share sale, the employees' jobs continue with the same corporate employer, unchanged. In an asset sale, the legal employer is being wound down, and the employees are, in a technical but real sense, out of a job unless the buyer offers to take them on.

The employment problem

Under the Employment Standards Act, 2000, when a business is sold as an asset transaction, an employee's service with the seller counts as continuous service with the buyer only if the buyer offers the employee a job and the employee accepts it. If the buyer doesn't extend an offer, or the employee reasonably declines one because the new terms are substantially worse, the seller is treated as though it terminated that employee. That can trigger statutory notice or pay in lieu, and in some cases severance pay, owed by the seller — not the buyer.

Wilson's company sent out draft offer letters about three weeks before closing, and they were not close to matching what Ari's employees already had. Two senior technicians, with nine and twelve years of service respectively, were offered pay roughly twelve to fifteen percent below their current salaries, on the reasoning that Wilson's pay bands were standardized across his existing staff. A third employee, who managed scheduling and client billing, wasn't offered a role at all — Wilson's company already had someone doing that job.

Ari's instinct was to push the problem onto Wilson: it was his offer letters, so it should be his liability. That isn't how the law treats it. The purchase agreement was silent on who would bear the cost if employees didn't get comparable offers, which meant the default legal position applied — and the default position exposed the selling corporation, and potentially Ari and Herman personally as directors handling its wind-down, to termination pay claims from any employee who didn't receive and accept a genuinely comparable offer. The unmatched offers to the two technicians and the missing offer to the scheduling employee were, in effect, three live liabilities sitting inside a deal that was supposed to close in a matter of weeks.

What we did

1. Reviewed every draft offer letter against current terms. We compared each employee's existing salary, benefits, vacation entitlement, and role against what Wilson's company had proposed, and flagged the gaps in writing rather than relying on a general sense that something felt off. This turned a vague worry into a specific, three-person problem with a dollar figure attached.
2. Explained the liability split clearly to both partners. Ari initially assumed the buyer's offer letters were the buyer's problem. We walked through why the selling corporation — and by extension its directors — could be on the hook for termination pay to any employee who didn't get a comparable offer, regardless of whose letterhead the offer was on. Understanding that the risk was theirs, not just Wilson's, changed how urgently they wanted it fixed.
3. Opened a direct conversation with Wilson's side about the gap. Rather than treating this as a dispute to litigate later, we raised it as a closing condition to solve now, while there was still room to negotiate. Buyers generally prefer to fix employment terms before closing rather than face a wind-down liability claim from a seller's departed staff afterward, since a messy transition also unsettles the very client relationships they're paying for.
4. Negotiated matched offers for the two technicians. Wilson agreed to bring both senior technicians in at their existing pay, with service recognized from their original start dates, in exchange for the sellers agreeing to a slightly longer holdback period tied to those employees staying through a transition window. This addressed the largest liability without either side simply absorbing the full cost alone.
5. Built a severance allowance into the deal for the scheduling role. Wilson's company genuinely didn't need a duplicate position, and no amount of negotiation was going to manufacture a job that didn't exist. Instead, we negotiated a shared severance fund, split between purchase price adjustment and a direct payment from the sellers, calibrated to what that employee's statutory entitlement would reasonably total given her length of service. This let the sellers meet their legal obligation without either partner paying the full amount personally on short notice.
6. Documented the final terms inside the purchase agreement. Once the numbers were agreed, we made sure the agreement itself specified which employees would receive offers, on what terms, and how the severance allowance for the scheduling employee would be funded and paid — closing off the ambiguity that had caused the problem in the first place.

The outcome

The deal closed roughly eleven weeks after the partners first sat down with the purchase agreement, about a week later than originally planned. The two senior technicians accepted matched offers and moved across to Wilson's company with their pay and service intact. The scheduling employee received a severance payment reflecting her years with the company, funded jointly through a modest price adjustment and a direct contribution from Ari and Herman, and she left on terms both sides considered fair rather than contested.

It wasn't a clean win for anyone. Wilson paid slightly more than his original offer once the holdback extension and severance contribution were factored in. Ari and Herman received slightly less in net proceeds than they'd hoped, and closing slipped by a week while the terms were finalized. But neither side walked away from a deal that had real momentum, and neither partner was left carrying an open-ended severance claim from a former employee months after the sale closed with no buyer left to share the cost.

Herman, who had stayed largely in the background through the sale process working his own shifts as a paramedic, said afterward that he hadn't realized how much personal exposure sat inside what looked like a routine staffing detail. Ari, who'd built relationships with every one of the fourteen employees over more than a decade, was glad the two technicians who'd been with him longest didn't have to start over on worse terms somewhere else. The compromise cost both sides something. It also meant the sale actually closed, and closed clean.

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