Rehearsing a Lender Presentation Caught a $750,000 Gap

The situation

Anita and Taras had spent twelve years building a small group of pharmacies across the west end of the Greater Toronto Area, both of them working the counter themselves in the early years before hiring enough staff to step back into management. By this year they operated six locations and were ready to grow by acquisition rather than by opening new stores from scratch. The opportunity came from Iryna, who owned a group of pharmacies and attached walk-in clinics in Etobicoke and was looking to retire after selling her original store decades earlier and expanding it into a five-location group.

The deal, once the parties agreed on price, sat in the mid-$30 millions — a transaction sized well beyond a simple asset purchase, structured instead as a share purchase agreement covering the operating company, its leases, its inventory, its staff and its pharmacist licences. Anita and Taras were funding part of the purchase price with their own capital and a vendor take-back note from Iryna, but the bulk of it required a term loan from their bank. Our firm was retained as buy-side counsel: negotiating the share purchase agreement, running due diligence on the target, and coordinating the conditions the bank's credit team needed satisfied before it would advance the loan.

Where the risk was hiding

Banks financing a transaction of this size do not simply review financial statements and sign off. Once the credit application clears an initial underwriting review, the borrower — here, Anita and Taras, through their acquisition entity — is usually asked to present the deal directly to the lender's credit committee: a live meeting where management walks through the target's financials, the growth plan, and how the loan will be repaid. It is part pitch and part interrogation, and it matters, because a credit committee that loses confidence in the numbers can shrink the loan amount, add conditions, or decline the file outright days before a scheduled closing.

Anita and Taras's accountant had built the deck for this presentation, drawing figures from the target's internal reporting rather than from the disclosure schedule attached to the share purchase agreement. That schedule is the seller's sworn inventory of exactly what is being sold — assets, contracts, liabilities, encumbrances — and it is what the representations and warranties in the agreement are legally anchored to. A management presentation and a disclosure schedule are supposed to tell the same story from two different angles. When they diverge, something in the deal has not been fully understood, and a lender's credit committee is a bad place to discover that for the first time.

The specific gap sat in accounts receivable. The presentation listed roughly $2.3 million in receivables owed to the target's pharmacies — money billed to insurers and drug plans not yet collected — presented as an asset supporting the target's working capital and, by extension, the loan. The disclosure schedule and the underlying factoring agreement told a different story: about $750,000 of that receivables balance had already been sold to a third-party finance company under a factoring arrangement, meaning the target had received an advance against those invoices and no longer owned the right to collect them in full. The pharmacies still processed the claims, but a chunk of the money behind them belonged to someone else.

What we did

1. Ran a full rehearsal before the real presentation. We asked Anita and Taras to walk through the deck with us exactly as they intended to present it to the bank, slide by slide, with our team asking the kind of pointed questions a credit committee typically asks. This is a standard part of how we support financing-contingent deals — a presentation is a legal document in substance even when it isn't one in form, because the numbers in it can become the basis for a lender's decision and, later, for a dispute if they turn out to be wrong.
2. Reconciled every figure against the disclosure schedule. Before the rehearsal, we cross-checked the deck's financial claims line by line against the target's disclosure schedule and the financial statements referenced in the share purchase agreement. That process surfaced the receivables gap directly — the deck's number and the schedule's number simply did not match, and a $750,000 difference on a receivables line was too large to be rounding.
3. Traced the discrepancy to its source. We requested the underlying factoring agreement from the target's lawyer and confirmed the mechanics: the finance company held a security interest in a defined pool of the target's receivables and had already advanced funds against them. That pool overlapped almost entirely with the $750,000 gap. The receivables were real, but they were not an asset the buyer would actually acquire free and clear.
4. Corrected the presentation before it went to the bank. We worked with Anita and Taras's accountant to rebuild the working capital section of the deck around the true, unencumbered receivables figure, and prepared a short explanatory note describing the factoring arrangement and how it would be dealt with at closing — transparency a credit committee generally rewards far more than a clean number that later turns out to be wrong.
5. Adjusted the purchase price through the agreement's own mechanism. The share purchase agreement already contained a working capital adjustment clause, designed for exactly this kind of gap between assumed and actual figures at closing. We applied it to reduce the purchase price by the $750,000 shortfall, bringing the deal from roughly $38 million to roughly $37.25 million, and confirmed with Iryna's counsel that the factoring arrangement would be paid out and discharged before closing so the buyer received the pharmacies free of that encumbrance.

The outcome

Anita and Taras presented the corrected deck to the bank's credit committee two weeks later. The receivables figure matched the disclosure schedule, the working capital adjustment was already reflected in the purchase price, and the explanatory note meant nobody in the room was hearing about the factoring arrangement for the first time. The committee approved the loan without additional conditions, and the deal closed roughly six weeks after that at the adjusted price of about $37.25 million, with the factoring arrangement discharged at closing as agreed.

Nothing dramatic happened at the credit committee meeting, which was the point. Had the original deck gone forward unrehearsed, the most likely outcome was not a collapsed loan — banks rarely walk away from a well-underwritten file over one line item — but a credibility hit that would have cost time: a request for a revised deck, a delay while the discrepancy was investigated fresh under scrutiny, and a purchase price negotiation with Iryna conducted under time pressure rather than as a routine step. In a deal financed partly by a vendor take-back, a shaken lender relationship can also spill into how the vendor reads the buyer's reliability. None of that happened, because the gap was found and fixed on a Tuesday afternoon rehearsal rather than in front of the people deciding whether to fund the loan.

Anita and Taras took over the five Etobicoke locations on schedule, retained the pharmacists and clinic staff who wanted to stay, and notified Ontario's pharmacy regulator of the change in ownership as required for each licensed location. Iryna's take-back note was calculated against the adjusted price, so the correction flowed through cleanly rather than becoming a separate negotiation after the fact.

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