Selling a Unionized Contracting Firm Without Losing the Team

The situation

Elena built her general contracting business over two decades, starting as a construction project manager running small commercial fit-outs and eventually growing the firm into a company doing roughly $35 million a year in institutional and commercial work, with about 120 employees. Most of the tradespeople on her job sites were unionized through their trade locals, standard for the sector. Her office staff — estimators, project managers, and a small sales team led by a sales director named Cristina — were not.

A larger national contractor made an offer to buy the business outright for a price that would eventually land around $38 million, subject to adjustments. Elena came to us once the buyer's letter of intent was signed, wanting to understand what the sale would actually require and, more urgently, whether her leadership team would still be standing on the other side of it.

She had reason to worry. Cristina had built most of the firm's largest client relationships personally, and two senior project managers, including one named Lucia, had specialized knowledge of ongoing projects that would be difficult and expensive for a buyer to replace. If any of them left in the weeks around closing, the buyer's own financial model — built partly on the assumption that the existing client relationships and project pipeline would transfer smoothly — would take a real hit. A buyer who senses that risk either lowers the price, adds conditions, or walks.

The problem

Two separate issues had to be worked through, and they pulled in different directions.

The first was the unionized workforce. Under Ontario's Labour Relations Act, when a unionized business is sold as a going concern, the union's bargaining rights and the existing collective agreement generally carry over automatically to the new employer — the buyer cannot simply walk away from the union by structuring the deal a certain way. The buyer's advisors understood this and had already priced it into their offer; it was not, on its own, a threat to the transaction. But it meant the deal had to be structured as a purchase that preserved the employment relationship for the unionized tradespeople, which ruled out some of the more aggressive restructuring options a buyer might otherwise consider.

The second issue was the one nobody's paperwork accounted for: the non-union management team had no reason to stay. None of them held equity in the company. None of them had an employment contract with any retention incentive. Cristina, in particular, had fielded a call from a competitor two months earlier and had mentioned it to Elena only in passing. If she left before closing, or in the first year after, the buyer's purchase price — which assumed a functioning sales pipeline — would no longer reflect what they were actually getting.

Elena's instinct was to simply promise everyone a bonus verbally once the deal closed. That approach fails for a specific reason: an undocumented promise made by a seller who is about to stop owning the company is worth nothing to the people it is meant to retain, and it gives the buyer no comfort either. What the deal needed was a structure the buyer could rely on before they signed, not a private assurance after.

What we did

1. Confirmed the union successorship position early. We reviewed the collective agreement and confirmed which entity would be the successor employer under the deal structure being proposed, and flagged the point clearly to Elena and to the buyer's counsel so it never became a late-stage surprise. Framing it as settled and expected, rather than as a negotiable point, kept it from consuming time better spent on the retention issue.
2. Identified the true retention risk. We asked Elena to rank her management team by how much of the company's ongoing value each person represented — not by seniority or title, but by what would break if they left. Cristina and the two senior project managers came out clearly ahead of the rest.
3. Designed a management incentive plan tied to the transaction. We structured a bonus pool, funded partly from the sale proceeds and partly by the buyer, payable to the four key managers in installments: a portion on closing, and the balance conditional on each person remaining employed through defined milestones after closing. The amounts were calibrated so that leaving early cost each manager more than staying was worth to a competitor's signing bonus.
4. Negotiated the split with the buyer's counsel. Buyers are often more willing to fund part of a retention pool directly than sellers expect, because it is cheaper than losing the client relationships they are paying for. We secured the buyer's agreement to contribute roughly $1.2 million of the total retention pool, reducing what came out of Elena's own proceeds.
5. Built in individual retention agreements, not just a pool. A shared bonus pool with vague eligibility invites disputes later about who gets what. Each of the four managers signed an individual agreement setting out their specific amount and vesting schedule, reviewed independently before signing so the arrangement would hold up if challenged.
6. Timed disclosure to the team carefully. We advised against telling the four managers about the retention plan until the deal was far enough along that collapse was unlikely, but early enough that none of them would feel blindsided at closing. Elena told them roughly six weeks before the anticipated close, once financing conditions had been satisfied.

The outcome

The sale closed roughly four months after the buyer's letter of intent, at a purchase price close to the original $38 million figure, adjusted slightly for working capital in the usual way these deals settle. The union transition proceeded as expected — the tradespeople kept their jobs, their collective agreement, and their bargaining representative, with no disruption to ongoing job sites.

All four managers stayed through closing and past the first retention milestone. Cristina, whose relationships anchored roughly a third of the firm's active client base, stayed on for a full year under the new ownership before eventually leaving for a role elsewhere — by which point the client relationships had transitioned properly and the buyer no longer considered her departure a material risk. The retention pool, split roughly evenly across the four managers, ended up costing Elena about $1.8 million from her own proceeds after the buyer's contribution, a cost she weighed against the alternative of a lower sale price or a collapsed deal and considered well spent.

Elena's net proceeds after the retention pool, transaction costs, and adjustments still landed in the range she had hoped for when she first engaged an advisor to test the market for the business. The buyer later told her, informally, that the retention structure was one of the reasons they moved forward on schedule rather than asking for a price reduction to cover the risk themselves.

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