When Two Distribution Networks Turned Out to Overlap

The situation

By the time Tesfay and Sanja came to our office, they had already spent nearly four months trying to solve the problem entirely on their own. The two had built a specialty goods distribution business out of Markham over the past decade, Tesfay bringing a background in software development before switching fields and Sanja an actuarial one, and had decided the fastest way to grow the business further was to acquire an existing franchise network in the same product category rather than build one out from scratch over several more years. They found a network they liked, run by Jelena, priced at just under forty million dollars once inventory and the underlying franchise agreements were folded into the purchase price, with Sanja handling most of the early exploratory conversations and Tesfay focused on lining up financing for a deal, and a deal size, neither of them had handled before.

The trouble surfaced during their own preliminary review of the target, well before any lawyers on either side were involved in the discussion. Several of the franchise territories in Jelena's network sat squarely in the same geographic areas that Tesfay and Sanja's existing distribution business already served directly through its own delivery routes. Rather than treat this as the legal question it actually was, the two had tried to handle it themselves informally, proposing to Jelena over a series of calls that the overlapping territories simply be carved out of the deal, or adjusted by informal agreement once closing happened and the paperwork could catch up later.

Jelena had been agreeable enough in conversation but never willing to commit anything specific to writing. Every time Tesfay or Sanja pushed for an actual list of territories to be excluded from the sale, the response was some version of general reassurance that it would sort itself out naturally after closing, without ever producing a single document that said so in concrete terms. Four months in, Tesfay and Sanja had nothing more than a verbal understanding they could not really rely on, and a deal timeline slipping further and further behind their own original schedule.

What finally brought them to us was less the overlap itself than the growing, uncomfortable sense that they were negotiating against something they could not see clearly enough to evaluate properly. Sanja, in particular, was blunt with us from the very first meeting about what mattered most going into the file: not necessarily the best possible price on paper, but a process they could actually predict in advance, with a defined cost and a defined outcome, rather than another few months of calls that kept going nowhere.

What the other side was relying on

Once we reviewed the franchise agreements underlying Jelena's network in full, the pattern behind four months of vague reassurance became a good deal clearer. The agreements granted franchisees territorial rights using language that was broad and generous in some places and conspicuously silent in others, the kind of drafting that gives a franchisor considerable room to argue either side of a boundary dispute depending on which answer happens to suit the moment. Jelena's team was not confused about the overlap between the two networks. They understood it well enough to know that putting anything specific in writing would immediately surface exactly how much of the network genuinely conflicted with Tesfay and Sanja's existing territory, and how that might affect price.

The other side was also relying on something considerably less technical than contract language: plain momentum and fatigue. Four months into informal talks, Tesfay and Sanja had already told their lenders a deal was likely to close, had already begun quietly planning the integration of the two networks internally, and had every practical incentive to keep moving forward rather than walk away and start over with someone else. Jelena's side seemed to be counting on the buyers accepting vague verbal assurances rather than risking the collapse of months of work by pushing too hard for the kind of specifics that might reveal a bigger problem than anyone had said out loud yet.

There was a third dynamic at work, tied directly to how the deal had been framed from the very start of the conversation. Sanja and Tesfay had made clear early on, including in direct conversation with Jelena, that predictable cost and a smooth process mattered enormously to them as first-time buyers. That preference, entirely reasonable on its own terms, had apparently been read by the other side as a signal that the buyers would rather accept an unresolved risk quietly than pay for the extra time and legal cost of resolving it properly before closing the transaction.

None of this necessarily meant Jelena was acting in bad faith in any formal legal sense. Franchise agreements with imprecise territory language are common enough across the industry, and offering reassurance rather than documentation is a familiar negotiating posture when a seller would rather not put a number on their own weakness. But understanding clearly what the other side was actually counting on, avoided documentation, buyer momentum built over months, and a stated preference for predictability being quietly mistaken for a willingness to absorb risk without ever pricing it, was exactly what let us change the terms of the conversation going forward.

What we did

1. Pulled and mapped every franchise agreement's territory description against the buyer's own existing service areas, rather than relying on Jelena's team's own characterization of the overlap, because four months of informal conversation had produced no reliable account of how much conflict actually existed on the ground. This diligence work identified specific overlapping postal areas street by street, rather than leaving the buyers with a vague general impression of the problem.
2. Quantified the actual revenue at stake in the overlapping territories, using the target's own franchise sales reporting and royalty records, to give Tesfay and Sanja a real number to work with rather than an abstract worry they could not act on. This step turned an emotional four-month standoff into a concrete negotiating point measured in dollars both sides could evaluate.
3. Set a firm requirement that any territory adjustment be fully documented before signing, not simply promised for after closing as Jelena's team had suggested for months, because four months of verbal reassurance had already shown what an undocumented promise from this seller was actually worth. We explained to them plainly and directly that a verbal understanding offered no real protection once the deal was done and the buyers had no further leverage left to enforce it, which is what finally moved the conversation from talk to paper.
4. Proposed a defined, written carve-out of the most directly conflicting territories from the acquisition altogether, rather than trying to renegotiate every overlapping franchise agreement individually one at a time, an approach that would have kept the deal in dispute for months longer than either side could afford. The carve-out gave both sides a genuinely workable path forward, converting dozens of separate territory-line arguments into a single, clean boundary both parties could agree to and hold each other to.
5. Negotiated a price adjustment tied specifically to the carved-out territories and the remaining, less severe overlap, reflecting honestly that the buyers were now acquiring a smaller and cleaner network than originally discussed. Rather than paying full price for territories that would need to be resolved or simply abandoned regardless of what the contract said, Tesfay and Sanja paid for the network they were actually getting, giving them a defensible number to take to their lenders instead of a price built on an assumption that no longer held.
6. Built a specific indemnity covering any franchisee disputes arising from the remaining overlap, since a handful of lower-conflict territories were deliberately kept in the deal at the client's own request rather than carved out entirely. The indemnity gave Tesfay and Sanja a clearly defined remedy rather than open-ended exposure if a franchisee in one of those territories later objected to the arrangement, so the residual risk they had chosen to accept came with an actual mechanism for resolving it.
7. Fixed a firm closing timeline with defined milestones along the way, directly responding to Sanja's stated priority on predictability from the very first meeting rather than treating that preference as a nice-to-have. Publishing the schedule meant the remaining weeks of the deal proceeded against dates both sides had actually agreed to, rather than drifting the way the previous four months of informal talks had, and gave Tesfay and Sanja a concrete answer whenever they asked how much longer the process would take.
8. Delivered a plain-language cost estimate at each milestone, breaking down what remained to be done and roughly what it would cost to finish, because Tesfay and Sanja had told us directly that surprise costs, not just surprise outcomes, were part of what had made the earlier four months so stressful for them. Knowing the number in advance at every stage let them plan their financing properly instead of discovering the total only once the final invoice arrived.

The outcome

The deal closed roughly ten weeks after Tesfay and Sanja first came to us, at a purchase price reduced from the original figure discussed to reflect both the carved-out territories and the residual risk still sitting in the ones that remained in the deal. The overlap was not eliminated entirely, and it would have been dishonest to promise it could be. A handful of franchise territories still sit close enough to the buyer's existing operations that some tension is genuinely likely as the two networks integrate over the coming months, and that risk is now covered by a documented indemnity rather than resolved outright once and for all.

What changed most through this process was not really the amount of overlap itself but the buyers' ability to plan around it with confidence. Tesfay and Sanja closed the deal knowing precisely which territories carried residual risk, exactly what the indemnity would cover if a dispute ever arose, and precisely what the adjusted price reflected and why. That was the outcome Sanja had asked for from the very first conversation in our office, a defined and contained picture rather than an open-ended one, even though achieving it meant walking away from a portion of the network they had originally hoped to acquire in full.

Months after closing, no franchisee dispute has yet been made under the indemnity, though the two businesses remain in the early stages of a careful integration process. Tesfay and Sanja describe the deal today as smaller than they had originally wanted but far more manageable than the version they were negotiating entirely on their own for those first four difficult months. It is a trade they say plainly they would make again, given what those earlier months of drift had already cost them in delay, uncertainty, and lost momentum with their own lenders.

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