Chasing a Customer's Consent Before a Petawawa Merger Closed

The situation

Winnie had trained and worked as a surgeon before leaving clinical practice to build a construction company that specialized in a narrow niche: renovating and expanding hospital and clinic facilities across Eastern Ontario. Her clinical background made her fluent in infection-control standards, phased construction around live patient care, and the procurement processes hospital networks use — knowledge that was hard for competitors to replicate. Over twelve years she had built the company into a reliable subcontractor for a regional hospital network's ongoing capital projects.

Raymond owned a competing firm in the same niche, based out of Petawawa, with a larger crew and heavier equipment but less institutional history with that same hospital network. The two had bid against each other for years. By the time they came to Treadstone Law, they had already agreed in principle to combine the two companies into a single platform, structured as a merger that would fold Winnie's company into Raymond's, with Winnie taking a substantial ownership stake in the combined entity. The agreed value of the transaction was roughly $65 million, reflecting both companies' equipment, contracts, and projected combined revenue from institutional work across the region.

Our team was retained to run legal due diligence on Winnie's company, negotiate the merger agreement, and get the deal to a clean closing.

What due diligence found

Winnie's company generated most of its revenue from a small number of large institutional customers, and one stood out: a multi-year standing agreement with the regional hospital network that alone accounted for roughly $14 million a year, or about a third of the company's total revenue. That single contract had been built into the valuation both sides used to agree on the $65 million price — lose it, and the combined company was worth meaningfully less than what Raymond's side had agreed to pay.

Reviewing the contract itself, our team found a standard but easy-to-miss clause: the agreement could not be assigned, and no change of control in the contractor's ownership could occur, without the hospital network's prior written consent. A merger that folded Winnie's company into Raymond's counted as exactly that kind of change of control. Without consent, the hospital network would have grounds to treat the contract as terminated the moment the merger closed — which meant the buyer could close the deal, pay the price, and discover afterward that the anchor contract they had paid for no longer existed.

This kind of clause exists in most institutional and government-adjacent contracts precisely so that a customer is not forced to accept a new counterparty it never agreed to work with. Hospital networks in particular vet contractors on safety record, bonding capacity, and staff security clearances — a merger can change all three, which is exactly why the customer's consent right matters and why it cannot simply be assumed or worked around after the fact.

What we did

1. Flagged the clause as a closing condition, not a formality. Rather than noting it as a routine diligence item to disclose and move past, we made the hospital network's written consent an explicit condition to closing in the merger agreement, meaning the deal legally could not complete until that consent was obtained.
2. Approached the customer well before the target closing date. We recommended contacting the hospital network's contracts office roughly ten weeks before the parties hoped to close, giving the customer's own internal approval process — and Winnie and Raymond — real time to work through any concerns, instead of scrambling in the final days.
3. Prepared the request to answer the customer's likely questions upfront. The submission explained who Raymond's company was, its safety and bonding record, and how the combined company intended to staff ongoing hospital projects, rather than simply asking for a signature.
4. Kept negotiating once the customer raised concerns. The hospital network's contracts office, run by a facilities director named Carlos, came back after several weeks with reservations: it was comfortable with Raymond's company generally, but not with handing the full scope of an active, sensitive expansion project to a newly merged entity mid-project. Rather than treating this as a dead end, our team worked with Winnie and Raymond to propose a phased handover, keeping Winnie personally involved in oversight of the live project through its completion.
5. Quantified the shortfall once it became clear consent would be partial. Carlos's office ultimately agreed to consent to the merger, but only on the basis that the largest ongoing project be substantially completed under the existing team before any staffing changes, and that future work would go to competitive re-tender rather than automatically rolling over. We worked with both parties' accountants to estimate the effect: future annual revenue from that customer would likely drop by about $5 million once the current project wound down, a meaningful cut to the number the $65 million price had been built on.
6. Reopened the price, not the deal. With the risk now documented and quantified rather than theoretical, we negotiated a purchase price reduction of roughly $7 million, bringing the total transaction value down to reflect the customer's confirmed intentions, and built the adjustment into the closing documents alongside a shorter transition-services arrangement for Winnie during the handover.

The outcome

The merger closed roughly two months after the original target date, delayed by the consent negotiation but not derailed by it. Winnie and Raymond's combined company lost real, permanent revenue: the roughly $5 million a year they had counted on from the hospital network's largest contract will not fully materialize once the current project ends, and that customer relationship is now smaller and less certain than it was before the merger. That loss was genuine, and no amount of good lawyering was going to make the customer keep a contract term it no longer wanted to offer.

What early action changed was where that loss showed up. Because the risk was identified and raised with the customer months before closing, it was priced into the deal itself — a roughly $7 million reduction that Raymond's side did not have to pay for a revenue stream that was never going to materialize — rather than discovered afterward as a breach of the merger agreement's representations about the target company's contracts. Had the merger closed without the customer's consent, the hospital network would have had grounds to terminate the entire standing agreement immediately, not just scale it back, and Raymond's company could have had a claim against Winnie's side for misrepresenting the value of what was being sold. Chasing the consent early converted a potential lawsuit into a negotiated price adjustment both sides could live with.

The combined company completed the live hospital project on schedule under Winnie's continued oversight, preserving the relationship enough that the hospital network has since invited them to bid competitively on new work — without the automatic renewal they used to have, but without having burned the relationship either.

What you can learn from this