When a Buyer Tried to Walk: A Richmond Hill Construction Sale

The situation

Dante had spent two decades building a commercial construction company in Richmond Hill, growing it from a handful of crews into a business with contracts across the region. His wife, Rosario, a dentist who owns her own practice, had put early savings into the company when it was still a risk and had held a minority share ever since, though she had never worked a day on a job site. When a private equity-backed buyer approached with an offer to acquire the company for roughly $68 million, the couple treated it as the end of one chapter and the start of retirement planning for both of them.

The purchase agreement was negotiated over several months and signed with a closing date set about ten weeks out, standard for a deal that size, to allow time for financing conditions, regulatory filings and other closing steps. Buried in the agreement, as it is in nearly every transaction of this scale, was a material adverse change clause — often called a MAC clause. It gave the buyer a narrow right to walk away from, or renegotiate, the deal if something happened to the business between signing and closing that was serious enough to undermine the reason for the purchase in the first place. Our team acted for Dante and Rosario as sellers and had negotiated that clause carefully, including carve-outs that excluded industry-wide downturns, changes in law, and general economic conditions from counting as a material adverse change. At the time, it read like boilerplate. It did not stay that way.

When the deal wobbled

Six weeks after signing, a large public infrastructure contract that made up a significant share of the company's forecast revenue for the following two years was suspended pending a municipal budget review. The suspension was not unique to Dante's company — several contractors working on similar public projects across the region were affected at the same time, as the review applied broadly rather than singling out any one contractor. But it hit the company's near-term numbers hard, and the buyer's financial advisors noticed within days.

The buyer's lawyers sent a notice invoking the MAC clause, arguing that the suspended contract represented a material adverse change and that the buyer was entitled to either walk away from the deal entirely or renegotiate the price to reflect the company's reduced near-term revenue. The letter arrived four weeks before the scheduled closing date, with financing conditions still outstanding and Rosario's dental practice bookings already adjusted around the closing week she had planned to take off.

MAC clauses are notoriously difficult for a buyer to actually rely on, and Ontario courts, like courts elsewhere, have generally read them narrowly. A buyer invoking one has to show that the change was significant, that it was likely to be durable rather than temporary, and — critically, given the carve-outs in this agreement — that it affected the target company disproportionately compared to others in the same industry. An industry-wide slowdown that hits every comparable contractor is usually exactly the kind of event a well-drafted MAC clause is written to exclude, precisely so a buyer cannot use ordinary market turbulence as an excuse to escape a deal it no longer likes on price.

What we did

1. Went back to the contract language line by line. The carve-outs our team had negotiated at signing excluded changes affecting the construction industry generally, unless the company was affected in a disproportionate way. We compared the suspended contract's impact on Dante's company against public information about other contractors facing the same municipal review, to test whether the buyer's disproportionality argument could actually be supported.
2. Assessed durability, not just size. A drop in near-term revenue is not automatically a material adverse change if it is likely temporary. We worked with Dante to document that the suspended contract was under review, not cancelled, and that municipal budget reviews of this kind typically resolved within a matter of months rather than derailing a project outright.
3. Pushed back on the buyer's notice in writing before positions hardened. Rather than letting the dispute sit while financing conditions ran out the clock, we responded promptly to the buyer's counsel, setting out why the suspension fell within the agreed carve-outs and did not meet the bar the clause required, while making clear the sellers intended to hold the buyer to the deal it signed.
4. Weighed the real cost of a fight against the cost of a compromise. Dante and Rosario could have insisted on the full $68 million and forced the issue toward litigation if the buyer refused to close, but a contested closing risked months of delay, legal costs on both sides, and the real possibility that the buyer's financing commitment would lapse in the meantime, leaving the sellers with no deal at all. We advised them on what a litigated outcome might realistically achieve against what a negotiated one could secure now.
5. Negotiated a structured compromise rather than a straight price cut. Instead of accepting the buyer's opening demand for a flat reduction, we proposed a smaller adjustment to the closing price paired with a holdback — a portion of the purchase price set aside in escrow rather than paid at closing — tied to whether the suspended contract resumed within an agreed window after closing.
6. Coordinated the revised timeline with the buyer's lenders. Because the buyer's own financing was conditional on the deal closing on particular terms, we worked with counsel on both sides to document the revised price and holdback in a way the buyer's lender would accept without reopening the entire financing package.

The outcome

The deal closed roughly ten weeks later than originally scheduled, at a purchase price of about $61 million — a reduction of roughly $7 million from the original $68 million — with $5 million of that revised price held back in escrow, to be released to Dante and Rosario if the suspended municipal contract resumed within eighteen months of closing, and otherwise retained in part by the buyer to offset the lost revenue.

It was not the outcome either side had signed up for at the start. The buyer had wanted a full walk-away right or a much larger price cut; the sellers had wanted the original price untouched. Both gave up something real. Dante and Rosario closed the sale for roughly $7 million less than they expected, and had to wait past the original date while the practice's booked time off and the couple's retirement plans slid by two months. The buyer, for its part, gave up the walk-away right it had claimed and accepted that most of the price reduction was tied to a contingency rather than banked immediately — meaning if the suspended contract came back online, a meaningful share of that $7 million would flow back to the sellers after all.

The suspended contract was reinstated by the municipality about eight months after closing, within the eighteen-month window the parties had agreed. Roughly $3.5 million of the $5 million holdback was released back to Dante and Rosario under the terms negotiated at closing, narrowing the final gap from the original price to closer to $3.5 million — a result far better than the outright walk-away or full price cut the buyer had initially demanded, though still short of the number the couple had celebrated on the day they signed.

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