A Newmarket Co-Chief-Executive Deal That Nearly Locked Nobody In

The situation

Alyssa's worry was specific: eighteen months after signing, she was scheduled to hand over sole chief-executive authority to Brandon, and she wanted to know what would actually stop the board from simply declining to make the change when the date arrived. Not whether the merger made sense, not whether Brandon was the right partner, but whether the piece of paper she was about to sign would mean anything on the one day that mattered most to her.

This was Alyssa's second company. She had built and sold a manufacturing business years earlier, then started a Newmarket engineering-services firm that had grown to roughly $28 million in annual revenue with a strong reputation in infrastructure and municipal work. Brandon, a partner in a larger engineering firm doing complementary work in the same region, approached her about combining the two businesses as a merger of equals rather than an acquisition by either side. The combined entity, valued in negotiations somewhere between $50 million and $80 million depending on how the earnout components were counted, would be co-led by Alyssa and Brandon as co-chief-executives for an eighteen-month transition period, after which Brandon alone would hold the role and Alyssa would move to an advisory board seat with a defined equity position.

The structure appealed to Alyssa because it let her step back gradually rather than walk away from a company she had built, and it gave the combined firm continuity through the transition instead of an abrupt change in leadership. She and Brandon had negotiated the commercial terms, the valuation, and the broad shape of the co-chief-executive arrangement directly with each other over several months, treating the lawyers on both sides as something to bring in once the business terms were settled, mainly to paper what they had already agreed.

By the time Alyssa came to Treadstone, a full draft merger agreement existed, both boards had reviewed it in principle, and a signing date was roughly three weeks out. Grace, who chaired the combined company's proposed governance committee and had been involved in shaping the board structure, told Alyssa plainly that the handover language needed a harder look before anyone signed. Alyssa's instinct was the same. What she could not tell, reading the document herself, was whether that instinct was right, or how bad the gap actually was.

Where it went wrong

The draft agreement described the handover in a single clause: at the eighteen-month mark, 'the parties shall cause Brandon to be appointed sole Chief Executive Officer and Alyssa to transition to the advisory board.' It read, on a first pass, like a settled commitment. It was not one. 'Shall cause' is not the same as 'shall occur.' A 'shall cause' obligation is generally read as a promise to use whatever powers you actually hold to bring about the result, stronger than a bare efforts clause, but it still cannot force a board to vote a particular way. Appointing a chief executive is a decision that sits with the board of directors unless some mechanism, such as a unanimous shareholder agreement, moves that power out of the board's hands, and nothing in the agreement did that, so nothing bound the future board, whose composition would itself shift over eighteen months as new directors joined, to actually vote that way when the date arrived.

That gap mattered because the merged company's board was structured to expand over the transition period, adding independent directors as part of the integration plan, and none of those future directors would have signed the merger agreement or be bound by its terms as a matter of contract. A board that included several people with no personal stake in honouring a handover negotiated before they joined could, entirely lawfully, decline to appoint Brandon, extend Alyssa's term, or open the role to an outside candidate, and nothing in the document as drafted gave Alyssa or Brandon a contractual remedy against the company for that outcome. The clause bound Alyssa and Brandon to each other in spirit, not the company in substance.

There was a second, related problem. The equity position Alyssa was meant to receive on moving to the advisory board was described as 'to be determined by mutual agreement of the parties at the time of transition,' rather than fixed now. Negotiated eighteen months out, with Alyssa having already stepped back from day-to-day authority and Brandon holding the operational role, that later negotiation would happen from a position where Alyssa had far less leverage than she had today. The document that was supposed to protect her exit had, in two separate places, deferred the terms that actually mattered to a future moment where she would be negotiating from a weaker position than the one she was in when she signed.

None of this reflected bad faith on Brandon's side. Both founders had negotiated the deal as partners who trusted each other, and the gaps were the kind that show up when experienced business people draft governance language themselves without testing it against how a board actually behaves once it is no longer just the two of them in the room.

What we did

1. Read the handover clause against how the board would actually be composed at month eighteen. We mapped out the planned board expansion schedule and identified exactly which future directors would have no contractual relationship to the merger agreement, which made concrete for Alyssa why 'shall cause' left her exposed rather than protected.
2. Converted the handover from a best-efforts obligation into a structural mechanism. Rather than relying on a future board vote at all, we negotiated a shareholders' agreement provision requiring the founding shareholders, who together would retain a controlling voting block through the transition period, to vote their shares in favour of the handover, which does not depend on the goodwill of directors who join later.
3. Fixed Alyssa's advisory-board equity position now instead of deferring it. We pushed to replace the 'to be determined' language with a specific formula tied to the company's revenue at the transition date, giving Alyssa a number she could evaluate today rather than a negotiation she would have to win later with less leverage.
4. Built in a fallback if the handover did not happen on schedule. We added a provision entitling Alyssa to a defined cash payment, calibrated to roughly what her advisory equity would have been worth, if the sole chief-executive appointment was not made within a set window of the transition date, so a stalled handover carried a real cost to the company rather than none.
5. Reviewed every other clause in the draft for the same pattern. Once we found two instances of important terms deferred to 'mutual agreement' at a future date, we checked the rest of the agreement for the same structure and found a third, governing how Alyssa's advisory board voting rights would be set, which we fixed the same way.
6. Negotiated the changes directly with Brandon's counsel rather than reopening the whole deal. Because the commercial terms Alyssa and Brandon had agreed were sound, we kept the renegotiation narrowly focused on governance and handover mechanics, which let both sides move quickly without relitigating valuation.
7. Compressed the review into the remaining timeline. With three weeks before the planned signing, we prioritized the handover and equity provisions first and flagged lower-priority drafting issues for cleanup rather than delaying the whole signing to fix everything at once.
8. Briefed Grace and the governance committee on the redraft before it went back to the board. Because Grace had raised the original concern and would need to defend the revised terms to the rest of the board, we walked her through exactly what changed and why, so the committee could approve the new language with a full understanding rather than a summary from Alyssa alone.
9. Confirmed the voting commitment would survive normal share transfers. We added a provision binding any transferee of the founding shareholders' stock to the same voting obligation during the transition period, so the mechanism could not be quietly unwound if either founder sold down part of their position before month eighteen.

The outcome

The merger closed nine weeks later than originally planned, with the handover provisions restructured around the founding shareholders' voting commitment and Alyssa's advisory equity fixed at a formula tied to revenue rather than left open. Brandon's side accepted the changes without serious resistance once the gap was explained in plain terms, since a firm handover date served his interests just as much as Alyssa's, but the added negotiation time and legal review pushed the deal past the date both founders had originally announced to their staff, which created some internal uncertainty during the delay.

The compromise was not free for Alyssa either. Fixing her equity position now, rather than leaving it open, meant accepting a formula that valued her position somewhat more conservatively than she might have argued for later if the company grew faster than projected. She gave up the possibility of a better number in exchange for the certainty of a defined one, which is the trade that comes with converting a discretionary future negotiation into a fixed present term.

Eighteen months on, the handover happened on schedule, with the shareholder voting commitment making the board decision close to a formality rather than a live question. What stayed with Alyssa was how close the original document had come to giving her nothing enforceable at the one moment the entire structure was built around. A merger of equals lives or dies on governance mechanics that hold up once the two founders who negotiated it are no longer the only people in the room, and that is exactly the kind of provision that is hardest to see the gap in without someone testing it from outside the friendship.

The nine-week delay had real costs beyond the internal uncertainty it caused. Both companies had planned integration milestones, including a joint bid on a municipal contract, around the original signing date, and pushing the close back meant renegotiating that timeline with a third party who had no involvement in the merger at all. Alyssa's view, looking back, was that the delay was a fair price for a document that actually did what she had believed the original draft already did. Grace's later comment to her, once the deal closed, was that the board would rather have taken nine extra weeks than spend eighteen months operating under a handover clause nobody could actually enforce.

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