Purchase of a Business

Purchase of a Business

When it’s time to expand your business horizons through the acquisition of a new business, you need a partner who understands the intricacies of Private M&A law. At Kalfa Law we specialize in guiding you through the purchase of a business, ensuring that every decision you make contributes to your success.

Target Identification

We assist you in identifying and evaluating potential business targets that align with your strategic objectives.

Due Diligence

Our meticulous due diligence process uncovers crucial information about the target company, such as its ownership structure, its liens, encumbrances, writs of execution or potential litigation.

Deal Structuring

We help you structure the transaction in a way that maximizes your financial and operational advantages. When acting on the purchase-side, we prefer an asset acquisition as opposed to a share acquisition such that we are procuring only those valuable assets we wish to acquire while leaving the liabilities behind. This is typically achieved by incorporating a new corporation to house the purchased assets acquired from its target.

Negotiation and Structuring

We will negotiate the structure of the deal (asset v sale) in a tax and liability efficient manner as well as negotiate the gritty provisions in the applicable purchase agreement being a Share Purchase or Asset Purchase Agreement including its representations, warranties and indemnification provisions.

Financing

Most often, a purchaser will require commercial financing to complete the transaction. Once a commitment letter has been obtained from a financial institution, we will assist in the facilitation of that funding, satisfying lending conditions and coordinating the transaction with funds flowing through our trust account in order to close.

Regulatory Compliance and Third Party Consents

We guide you through the complex landscape of regulatory requirements and third party consents including governmental, franchisor and landlord consent, ensuring we have the requisite authority to complete the purchase.

Closing and Integration

We manage the closing process and support you through the integration phase, ensuring a seamless transition in the acquired business.

Acquiring a business is a significant milestone. At Kalfa Law Firm we’re dedicated to making your acquisition journey strategically sound and legally secure while minimizing risk.

FAQs:

What legal steps are involved in purchasing a business in Canada?

A typical private acquisition moves through identifying the target, signing a letter of intent, running due diligence, structuring the transaction as an asset or share purchase, negotiating and signing the definitive purchase agreement, securing financing and any required third-party or regulatory consents, and finally closing and integrating the business. Each step has its own legal and tax implications, and most of them interact with the others, which is why working with an experienced M&A lawyer makes a material difference.

What is the difference between an asset purchase and a share purchase?

In an asset purchase you acquire selected assets of the business: inventory, equipment, goodwill, and specific contracts, while most liabilities stay with the seller. In a share purchase you acquire the shares of the existing company and inherit its assets and its liabilities together. Asset purchases are usually more buyer-friendly and more complex to execute; share purchases are usually simpler operationally and carry more historical risk. The right structure depends on the target, the tax profile of both sides, and the buyer’s risk tolerance.

How long does a business acquisition take?

Most small and mid-market acquisitions take roughly sixty to one hundred and twenty days from signed letter of intent to closing. The timeline depends on the depth of due diligence, the number of consents required, whether third-party financing is involved, and whether any regulatory approvals are needed. Well-run processes compress that window; unresolved structuring questions or late-breaking due diligence findings extend it.

Do I need a lawyer to buy a business in Canada?

Yes. Without legal counsel, buyers routinely miss liabilities that surface after closing, sign overly broad representations that come back as post-closing indemnity claims, and accept financing conditions they cannot actually satisfy. A business acquisition lawyer manages the due-diligence process, drafts and negotiates the purchase agreement, and coordinates the many moving parts so that closing actually happens on the date you intended.

Related Service: Business Law Services.

Can I finance the purchase of a business?

Yes, and most buyers do. Acquisitions are typically funded by some combination of commercial bank loans, equity investors, and vendor take-back financing from the seller. Once a commitment letter is in place, your lawyer will work with you and the lender to satisfy lending conditions, coordinate the flow of funds through trust, and ensure the financing condition in the purchase agreement aligns with what the lender will actually advance. See our Business Acquisition Financing page for more on the options.

What risks should I look out for when buying a business?

Common risks include hidden debts and undisclosed liabilities, pending or threatened litigation, regulatory non-compliance, overstated or misstated financial statements, customer concentration issues, key-person dependency, and contracts that terminate or reprice on a change of control. A thorough due-diligence process is what surfaces these issues in time to address them in price, in structure, or in the representations and indemnities in the purchase agreement.

What happens after the business purchase is complete?

After closing, your lawyer continues to assist with the practical transition, updating and reassigning contracts, transferring or renewing licenses, notifying regulators and counterparties, and working through any post-closing price adjustments or indemnity claims that arise. The first ninety days after closing tend to be the period in which most unexpected issues appear, and having counsel already engaged in the file makes them much faster and cheaper to resolve.

What is a letter of intent (LOI), and is it binding?

A letter of intent sets out the headline price, structure, and exclusivity period before due diligence begins. Most of it is non-binding, but specific clauses such as exclusivity, confidentiality, and expense allocation typically are. The wording matters because non-binding terms can create real obligations if they are not labelled clearly.

What are representations and warranties in a purchase agreement?

Representations and warranties are statements the seller makes about the business — that the financials are accurate, that there is no undisclosed litigation, that contracts are in good standing, and that taxes have been paid. If one turns out to be false after closing, the buyer can claim under the indemnity provisions. Scope, caps, and survival periods are heavily negotiated.

What is a working-capital adjustment in a business purchase?

A working-capital adjustment is a true-up after closing that reconciles the actual working capital in the business against a target agreed in the purchase agreement. If the business closes below the target, the price is adjusted down; if above, it is adjusted up. The mechanism prevents the buyer from inheriting a business stripped of operating capital.