Keeping the Team Together Through a North Bay Company Sale

The situation

Ari had spent eight years teaching elementary school before he and Kenneth, then an IT support lead at a mid-size employer, decided to build something of their own. Their idea was simple: school boards across northern Ontario needed steady, affordable technology support, and most of them were badly served by contracts written for cities much larger than North Bay. Thirteen years later, the company they built supported classroom technology, networks, and device fleets for dozens of schools across the region, with a staff of technicians, a small development team, and one person who held the whole operation together day to day: their general manager, Fiona.

By the time a national education-services company approached Ari and Kenneth about buying the business, it was generating enough revenue and recurring contract value that the two founders agreed on an enterprise value of roughly $22 million. Both were ready to sell. Ari wanted to return to something closer to the classroom, this time training teachers on the tools his company had built; Kenneth wanted a break before deciding what came next. Neither one, however, was the person the buyer actually needed to keep.

What the buyer's due diligence found

The buyer's lawyers ran the process most acquirers run: a period of due diligence before signing, during which their team examines the target company's contracts, financial records, employment arrangements, and key personnel before agreeing to a final price and closing conditions. Partway through that review, the buyer's advisors flagged what they called key person risk — the possibility that the value they were paying for depended heavily on one or two people who were not obligated to stay after closing.

Fiona was that person. She had run daily operations for nine years, held every client relationship the school boards actually trusted, and had trained the technical staff herself. She held no shares in the company and had no contractual reason to stay a single day past closing. Two other members of the management team, a service delivery lead and a finance lead, were in a similar position: valuable, well paid by the company's standards, and free to leave the moment the sale closed if they chose to.

The buyer's position was blunt during negotiations: without confidence that this management team would stay through the transition, they would either lower the purchase price to account for the risk of losing them, or insist on a longer post-closing period during which Ari and Kenneth remained personally responsible for operational continuity. Neither option appealed to the founders, who wanted a clean exit and a price that reflected the business they had actually built, not a discounted version of it.

What we did

1. Proposed a management incentive plan funded from the sale proceeds. Rather than asking Ari and Kenneth to give up more of the purchase price to a general holdback, we structured a management incentive plan, commonly called an MIP, that carved out a defined pool of the total proceeds to be paid directly to Fiona and the other two key managers, contingent on the deal closing and on each of them staying through specified points after closing. This reframed the retention problem: instead of the founders quietly worrying whether their team would stay, the team now had a direct financial stake in making sure the sale succeeded and the transition went well.
2. Sized the pool against what the buyer was actually paying for. We worked with Ari and Kenneth to set the MIP pool at a figure that reflected the real cost of losing institutional knowledge without eroding what the founders would personally receive. The pool came to roughly $1.6 million, allocated across the three managers by role and tenure, with Fiona receiving the largest share given her operational responsibility. That amount was carved out of the total $22 million enterprise value before the founders' own proceeds were calculated, so everyone understood exactly what it was costing to secure the retention the buyer wanted.
3. Split each payment between a closing bonus and a deferred, time-based payment. A single lump sum paid at closing gives a manager every reason to leave the next day. We structured each manager's allocation so that roughly a third was paid on closing itself, as recognition for getting the deal to the finish line, with the remainder paid in instalments over the following eighteen months, contingent on the manager remaining actively employed. This is sometimes called a double-trigger structure, because it requires both the sale closing and the individual staying employed afterward before the later payments are earned.
4. Addressed how the payments would be taxed and characterized. Payments tied to a sale can be treated very differently depending on how they are structured — as employment income, as a bonus, or in some cases as proceeds connected to the sale itself, each carrying different tax and withholding consequences under the Income Tax Act. We worked with the founders' accountants to make sure the MIP documents described each payment clearly as compensation for continued employment, so that the tax treatment and withholding obligations were predictable for both the company and the managers receiving the money.
5. Kept the plan separate from, but consistent with, the share purchase agreement. The MIP itself was documented as a standalone agreement between the company and each manager, but its existence, funding, and conditions were disclosed in full to the buyer and referenced in the share purchase agreement so there was no ambiguity about who was responsible for the payments after closing. We negotiated language confirming the buyer, as the company's new owner, would honour the deferred payments as an assumed obligation, so Fiona and the others were not relying solely on Ari and Kenneth's promise once the founders were no longer involved in the business.
6. Timed the disclosure to the management team carefully. Telling key employees about an impending sale too early risks a leak that damages client relationships or invites competitors to poach staff before a deal even closes; telling them too late risks losing their goodwill and cooperation during due diligence. We advised the founders on when to bring Fiona and the other two managers into the process, once the buyer's interest was serious enough to justify it but before due diligence required their direct involvement in providing records and answering questions.

The outcome

The MIP changed the tenor of the negotiation almost immediately. Once the buyer saw a concrete retention structure with real dollars behind it, their concerns about key person risk eased considerably, and the discount they had floated in early conversations never materialized in the final purchase agreement. The deal closed roughly five months after the founders first engaged our team, at the full $22 million enterprise value they had targeted, with the $1.6 million MIP pool funded at closing as agreed.

Fiona and the other two managers stayed through the transition exactly as the structure anticipated. Fiona received her closing payment and moved into a senior operations role under the new ownership, collecting her final deferred instalment roughly a year and a half after the sale closed. The buyer later told Ari, during a courtesy call after the transition period ended, that the continuity of the management team had made the integration far smoother than most of their previous acquisitions, where key staff had often left within months.

Ari and Kenneth walked away with proceeds that reflected the full value of the business they had built, not a price discounted for a risk they were able to address directly. Just as importantly, they left knowing the people who had helped them build the company were treated fairly on the way out — not an afterthought in the deal, but a planned part of it.

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