A floor price and a key contract went sideways in the same week

The situation

Nuwan and Dilshan had a plan that looked, on paper, close to routine. Their small acquisition company, built from savings and outside income beyond Nuwan's work as an air traffic controller and Dilshan's pharmacy practice, had spent two years looking for a manufacturing business to acquire and operate. A distressed Aylmer manufacturer of agricultural equipment components, working through a court-supervised insolvency sale process, fit what they wanted: real assets, an established customer base, a management team willing to stay on.

The sale was structured around a stalking-horse bid, a mechanism used in insolvency proceedings where one buyer agrees in advance to a floor price and terms, subject to court approval of the bid procedures, and the business is then marketed to see if anyone else will beat that offer. The stalking-horse bidder typically negotiates a break fee, an amount paid to compensate them for the work of setting the floor price if a higher bid ultimately wins. Nuwan and Dilshan's company agreed to serve as the stalking horse, at a price in the forty-million-dollar range, expecting a straightforward court hearing to approve the process, followed by a defined marketing period, followed by closing.

The court approved the bid procedures and the break fee without objection at the first hearing, and the marketing period opened. For several weeks, the file moved the way these processes usually do: the monitor overseeing the sale reached out to prospective buyers, and Nuwan and Dilshan's team began integration planning on the assumption their bid would likely stand as the winning one.

Both principals had approached the acquisition as a long-term project rather than a quick flip, and had already begun lining up a plant manager and discussing capital improvements with the existing engineering staff who planned to stay on. Bram, a longtime advisor to their acquisition company who was helping manage the transition, had spent the marketing period building rapport with the manufacturer's sales staff and its largest customers, work that would turn out to matter more than anyone expected. The mood on the file, for those first several weeks, was closer to routine diligence than crisis management.

Then, in the same short stretch, two unrelated problems surfaced. A group connected to the insolvent company's former ownership submitted a competing bid that questioned whether the stalking-horse process had been run fairly. And separately, the company's largest customer, whose contract accounted for a substantial share of the business's ongoing revenue, sent notice that the contract contained a clause letting the customer terminate on any change of control, and that it was considering doing exactly that.

What was actually at stake

The first problem threatened the sale process itself. The rival bid came from individuals connected to the company's prior ownership, submitted after the marketing period had technically closed, at a price only marginally higher than the stalking-horse bid, and structured in a way that raised real questions about whether it met the approved bid procedures at all. If the court allowed it to be considered as a qualified competing bid regardless, the entire value of having served as the stalking horse, the negotiated protections, the break fee, the certainty the process was designed to provide, would be undermined. Worse, if the process appeared to have been run unevenly, it risked delay while the court sorted out what counted as a valid bid.

The second problem threatened the value of what was actually being bought. The customer contract at risk represented a meaningful share of the business's revenue going forward. A change-of-control clause of this kind is common in commercial contracts and exists to let a party avoid being bound to a new, unknown owner without consent. If the customer exercised its right to terminate, the manufacturer Nuwan and Dilshan's company was acquiring would be worth significantly less than what the stalking-horse price assumed, even if the sale itself closed exactly as planned.

What made the two problems dangerous together was the timing. Either one alone would have been a manageable negotiation. Together, they created a scenario where a court might view the deal as suddenly uncertain on two fronts at once, exactly the kind of instability that can cause a judge overseeing an insolvency sale to slow the process down to be cautious, which itself would have eroded the advantage the stalking-horse position was meant to secure.

Nuwan and Dilshan's underlying commercial plan had not changed. They still wanted the business, at the price they had agreed to, with the customer relationship intact. The legal work was about making sure a process built for certainty did not get pulled apart by two problems that, examined properly, did not actually justify reopening it.

There was a further wrinkle in how the two problems could interact. If the customer had actually terminated its contract before the comeback hearing, that development itself could have been used by the rival bidder as fresh grounds to argue the business was worth less than the stalking-horse price assumed, opening an argument for reopening the auction on value grounds rather than procedural ones. Resolving the customer relationship quickly was not just about protecting the business's worth; it was about closing off a second avenue the rival bid could have used to keep the process unsettled going into the final hearing.

What we did

1. Reviewed the rival bid against the approved procedures in detail. We compared its timing, deposit, and terms line by line against what the court had approved, which showed it had missed the deadline set for qualified bids and lacked the financing confirmation the procedures required, giving us a concrete, procedural basis to challenge it rather than a general fairness argument.
2. Made submissions to the court defending the integrity of the process rather than attacking the rival bidder. We focused the argument on what the approved procedures required and how the late bid failed to meet them, which is a stronger position before a court than arguing about the other bidder's motives or history. Keeping the submissions narrow and factual gave the judge a clean procedural question to rule on, rather than an open-ended dispute over intentions the record could not settle.
3. Coordinated with the monitor rather than treating the monitor as opposing the client's interest. The monitor's role is to protect the fairness of the process for all stakeholders, not to favour any bidder, so we worked to show the monitor how the late bid's deficiencies were plain on the record, which supported the monitor recommending against considering it. A monitor's report carries real weight with the court, so having that conclusion reached independently gave the position credibility a purely adversarial submission could not supply.
4. Opened direct dialogue with the customer holding the change-of-control clause. Rather than treat the termination threat as final, we and the client's management contacts reached out to understand what assurances the customer actually wanted, which turned out to be operational continuity and a direct relationship with the incoming ownership, not a reason to walk away from the supply relationship itself.
5. Negotiated a consent and continuity agreement with the customer ahead of closing. We drafted an agreement in which the customer consented to the change of control in exchange for specific commitments about service levels and management continuity post-closing, resolving the termination risk without altering the underlying commercial terms of the contract. This addressed exactly what the customer had told us it wanted, reassurance rather than leverage, and kept the revenue base underpinning the purchase price intact heading into the final hearing.
6. Adjusted the closing conditions to reflect the resolved contract risk. With the customer's consent secured, we updated the purchase agreement's closing conditions so the transaction could proceed without an open contingency hanging over the deal's value going into the final court hearing. Leaving the old contingency language in place would have signalled that the customer risk remained unresolved even after it had actually been closed, so removing it made the record match reality and took away a detail the rival bid's supporters could otherwise have pointed to as ongoing uncertainty.
7. Prepared the client's team for the comeback hearing with both issues resolved. By the time the court reconvened to approve the winning bid, the rival bid's procedural deficiencies were documented and the customer risk was already closed, letting the hearing proceed as a straightforward confirmation rather than a contested one. We walked the client's team through exactly what the judge would be asked to confirm and what evidence supported each point, so nobody was improvising an answer if a question came from the bench.
8. Had Bram maintain the customer relationship through to signing. Rather than let the legal negotiation be the only contact the customer had with the incoming ownership, we kept Bram directly engaged with the customer's team throughout, which reinforced the continuity commitments in writing and gave the customer a consistent, familiar point of contact rather than a purely transactional one. A customer weighing whether to terminate over a change of control is really asking whether the relationship will survive, and a familiar voice answered that more persuasively than any clause could.
9. Prepared a contingency position in case the court wanted more time on the rival bid. Even with a strong procedural argument, we built a fallback position addressing what additional evidence or short adjournment might satisfy the court's caution, so the client's team was not caught flat-footed if the judge wanted more before ruling. Courts overseeing insolvency sales are naturally cautious about anything that could unsettle a certain process, so a ready answer to a request for more time gave a cautious judge somewhere to go short of reopening the auction.

The outcome

The court declined to treat the rival bid as a qualified competing bid, agreeing that it had not met the deadline or the financing requirements set out in the approved procedures, and the ruling was delivered without needing an adjournment for further evidence. No higher qualified bid emerged during the marketing period, and the stalking-horse bid stood as the winning offer. The break fee negotiated at the outset was never triggered, since it existed only to compensate the client if a rival bid had won, and Nuwan and Dilshan's company proceeded directly to closing on the original terms.

The customer contract remained in place under the consent and continuity agreement, preserving the revenue base that had made the acquisition attractive at the agreed price in the first place. The customer's service-level and management-continuity commitments were built into the transition plan Bram had already been developing, so the agreement reinforced work already underway rather than creating something new at the last minute. The sale closed roughly two months after the initial court approval, close to the timeline Nuwan and Dilshan had expected before either problem surfaced.

Neither issue, on its own, would likely have derailed a well-run process. What mattered was addressing each on its own terms, a procedural defence built from the record for the rival bid, and a direct commercial negotiation for the customer relationship, rather than letting the two get tangled together into one large, undifferentiated crisis that might have invited the court to slow the whole process down out of caution. The acquisition closed on the terms the client had planned for from the start, and the plant manager and engineering staff Nuwan and Dilshan had already been in contact with began the transition on schedule, picking up the capital improvement conversations that had started, informally, weeks before either problem had ever surfaced.

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