When the Rival Bidder's Exclusivity Ran Out in Peterborough

The situation

Angela built a Peterborough manufacturer of precision engineered components over twenty-two years, supplying parts into the automotive and aerospace supply chains. Approaching retirement with no family successor, she hired an M&A advisor to run a formal sale process. Two people inside the company knew the business better than anyone bidding for it: Ari, a university professor who had taken a leave to serve as the company's interim general manager, and Shira, a professional engineer who ran day-to-day operations as VP of engineering. Both had worked alongside Angela for a decade and had quietly discussed buying the company themselves someday.

That day arrived sooner than planned. An outside industrial holding company emerged as the lead bidder in Angela's sale process and signed a letter of intent — a preliminary agreement setting out the proposed price and terms before a full deal is negotiated. The letter of intent included an exclusivity clause: for a defined 60-day period, Angela agreed not to negotiate with, or even entertain approaches from, any other buyer while the holding company completed its due diligence and lined up financing. Ari and Shira, still employees at that point, had no legal path to bid. They came to Treadstone Law not with a transaction to sign, but with a question: if this deal fell apart, could they be ready to step in, and how would they know when the door had actually opened?

The opportunity in the fine print

Our team started by reading the letter of intent itself, even though our clients were not party to it — Angela shared a copy once it became clear Ari and Shira might have genuine interest. The exclusivity clause was standard in form but important in its detail: it ran for a fixed 60 days from signing, with no automatic renewal and no obligation on Angela to notify the first buyer before the period ended. If the holding company had not signed a definitive share purchase agreement by the deadline, Angela was free to talk to anyone else the moment the clock ran out.

As the weeks passed, the holding company's due diligence slowed. Its financing was conditional on a lender's own approval process, and that approval had not come through by week seven. Angela's advisor kept our clients informed at a distance — properly, since Angela still owed the first buyer good faith dealing during the exclusivity period itself. What she did not owe was an extension. Our advice to Ari and Shira was specific: use the remaining time to get fully ready to move, but do not approach Angela, her advisor, or the holding company with any offer, inquiry, or signal until the exclusivity period actually expired. Interfering during an active exclusivity period — even informally — can expose a competing bidder to a claim for improperly inducing a breach of contract, and it can sour the very relationship a management team depends on to win a deal on the merits.

What we did

1. Confirmed the exclusivity clause's hard expiry. We reviewed the letter of intent's language line by line to confirm there was no automatic extension, no right of first refusal surviving expiry, and no notice period Angela owed the first buyer before talking to someone else.
2. Lined up financing before the window opened. Ari and Shira could not fund a purchase of this size from savings. We coordinated with their prospective lender so a financing commitment was substantially ready before day sixty, and we structured part of the price as a vendor take-back note — seller financing from Angela herself, repaid over time — to close the remaining gap between what a lender would advance and the agreed price.
3. Drafted the share purchase agreement in advance. Rather than starting from a blank page once exclusivity lapsed, we prepared a full draft share purchase agreement — the contract transferring ownership of the company's shares — covering price, representations and warranties, and closing conditions, so our clients could present a complete, signable offer within hours rather than weeks.
4. Waited for the exclusivity period to actually end. We tracked the sixty-day deadline against the signing date in the letter of intent and confirmed with Angela's advisor, once the period lapsed and no definitive agreement had been signed with the first buyer, that Angela was free to consider other offers.
5. Delivered a complete, financed offer the same day. Once the window opened, our clients' offer went to Angela's advisor as a fully termed proposal with financing attached, not a preliminary indication of interest — removing the financing uncertainty that had slowed the first buyer down.
6. Negotiated the definitive agreement to closing. We negotiated representations and warranties, a working capital adjustment mechanism, and an escrow holdback to secure Angela's post-closing obligations, then handled the corporate mechanics of the share transfer under the Ontario Business Corporations Act, along with a reasonable non-competition covenant from Angela and continuity arrangements for the company's roughly ninety employees.

The outcome

The deal closed at a total consideration of roughly $38 million: about $30 million in cash funded through the lender at closing, a vendor take-back note from Angela of about $5 million repayable over several years, and an escrow holdback of about $3 million to secure her representations and warranties for a defined period after closing. The first bidder's exclusivity period had genuinely expired with no extension signed and no definitive agreement in place, so Angela's advisor confirmed she was free to proceed — the transaction closed cleanly with no claim of interference or breach from the original bidder.

Angela retired with the outcome she wanted: a buyer who knew the business, employees who kept their jobs, and a note structure that gave her ongoing income during her transition out of the company. Ari and Shira became co-owners of the business they had helped run for years, financed through a combination of institutional debt and the seller financing our team negotiated. The employees, suppliers, and customers experienced almost no disruption, since the buyers were already the people running daily operations. What made the deal possible was not luck — it was being genuinely ready, with financing and a drafted agreement in hand, the moment the contractual window opened.

What you can learn from this