The Rival Offer That Arrived Mid-Exclusivity

The situation

Dante had spent close to fifteen years building a corporation that owned and operated several franchise locations across the region. At sixty-one, he was ready to step back, and after months of quiet conversations with business brokers, he found a buyer: Mateo, a retired business owner looking to redeploy his savings into an operating business with steady cash flow.

The two sides negotiated a letter of intent, often called an LOI, setting out the framework of a deal: Mateo would buy the shares of Dante's holding corporation for roughly $6.2 million, subject to financing and a due diligence period during which Mateo's advisors would review the corporation's leases, financial statements, franchise agreements and staffing. The letter set that due diligence window at seventy-five days.

Buried in the letter, in a section headed "exclusivity," was a clause common to almost every LOI: for the length of the due diligence period, Dante agreed not to solicit, negotiate with, or provide information to any other prospective buyer. Lawyers call this a no-shop clause. Most of the rest of the letter was expressly non-binding — a statement of intent, not a contract — but the letter said plainly that the exclusivity section was binding regardless.

Dante signed it without much thought. Mateo's team began due diligence. For three weeks, nothing unusual happened.

The problem

Then Dante got a call from Alejandro, an investor who ran a small group of franchise operators in a neighbouring region and had apparently heard through industry contacts that Dante's business was in play. Alejandro was blunt: he would pay $6.7 million, roughly $500,000 more than Mateo's number, and he could move fast — no financing condition, cash from an existing credit facility, closing within sixty days.

Dante did not solicit that call. Alejandro found him on his own, which matters, because receiving an unsolicited approach is not itself a breach of a no-shop clause — the clause restricts what the seller does in response, not what arrives unannounced in his inbox. But half a million dollars is not a small number, and Dante wanted to know what he could actually do with it. Could he take Alejandro's call again? Ask a few clarifying questions? Let his broker quietly explore whether the number was real before deciding anything?

He called Treadstone Law before doing any of it, which turned out to be the most important decision in the whole file.

The honest answer was not the one he wanted. The exclusivity clause he had signed did not carve out unsolicited offers, did not have a "fiduciary out" of the kind sometimes seen in public company deals, and did not expire until day seventy-five. Engaging with Alejandro in any substantive way — negotiating price, sharing financials, even letting a broker sound him out — would very likely breach the letter, even though the rest of the LOI was non-binding. Courts in Ontario have consistently treated exclusivity and confidentiality provisions in an otherwise non-binding letter of intent as enforceable contracts on their own terms, precisely because sellers and buyers write them that way on purpose: the buyer is agreeing to spend real money on lawyers, accountants and inspectors in exchange for a promise that the seller will not shop the deal out from under them while that money is being spent.

What we did

1. Read the exclusivity clause line by line. We confirmed exactly what it restricted (soliciting, negotiating, and sharing information with third parties), exactly how long it ran (seventy-five days from signing, with no early-termination trigger tied to due diligence milestones), and confirmed there was no carve-out for unsolicited approaches or superior offers. Precision here mattered more than instinct — LOI language varies deal to deal, and assuming a clause works like one Dante had heard about from another business owner would have been a mistake.
2. Explained the real exposure if he breached it. If Dante negotiated with Alejandro and the original deal collapsed as a result, Mateo would have a strong claim for the costs he had already sunk into due diligence — accounting fees, legal fees, appraisal costs — and, depending on how the letter was worded, potentially a claim for lost opportunity if he could show the deal was otherwise on track to close. In some circumstances a court can also grant an injunction enforcing a binding exclusivity clause, effectively stopping the seller from dealing with anyone else while it runs, rather than just awarding money afterward. None of that is guaranteed in every case, but the risk was real enough that a $500,000 higher offer could easily turn into a net loss once legal exposure and reputational damage in a fairly small industry were weighed against it.
3. Drafted a short, careful response to Alejandro. Rather than ignoring him or engaging informally, we helped Dante send a brief written response declining to discuss terms while he remained under an existing exclusivity obligation, without disclosing confidential details of the pending transaction. This created a clean paper trail showing Dante had not solicited or negotiated, which mattered both for compliance with the clause and, had anything gone sideways later, as evidence of good faith.
4. Kept Mateo's transaction moving without tipping our hand. We did not mention the Alejandro approach to Mateo's lawyer — Dante had no obligation to volunteer that information, and doing so risked spooking a deal that was otherwise proceeding normally. Instead we focused on keeping due diligence on track: responding promptly to information requests, flagging two minor lease assignment issues early so they did not become last-minute surprises, and tracking the seventy-five day exclusivity deadline against the parties' progress toward a definitive share purchase agreement.
5. Confirmed the exit if the deal did fall through legitimately. We also gave Dante a clear answer to the question underneath his question: if Mateo's financing fell apart or due diligence uncovered a real problem and the deal died on its own, the exclusivity period would end and Dante would be free to call Alejandro back. He was not locked out of a better offer forever — only for as long as he had agreed to give Mateo a fair, uninterrupted run at closing.

The outcome

Mateo's due diligence wrapped up on schedule, with the two minor lease issues resolved well before closing. The parties moved from the letter of intent to a definitive share purchase agreement, and the sale closed at the originally agreed price of roughly $6.2 million. Dante never had to test what a court would have made of the exclusivity clause, because he never breached it — which is exactly the outcome that kind of advice is meant to produce.

He also never found out for certain whether Alejandro's $6.7 million offer would have survived its own due diligence, financing checks and final negotiation. Unsolicited offers that arrive mid-transaction often shrink or evaporate once a buyer is asked to put real money behind a number they threw out on a phone call. Chasing it would have meant walking away from a documented deal with a buyer who was already deep into a serious process, on the strength of a conversation that had not yet been tested at all.

Dante's business changed hands cleanly, on the timeline both sides had agreed to, with no litigation, no damages claim, and no cloud over the transaction. That is a quiet outcome, but for a seller who came within a phone call of breaching a binding clause without realizing it, quiet was the win.

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