Comparisons
Two options, one decision
Side-by-side comparisons of the choices Canadian buyers and sellers actually face — asset versus share, broker versus direct, and the rest.
Brokers
- Business broker vs M&A advisorA business broker typically markets smaller, owner-operated businesses to a broad buyer pool and is paid mainly on a completed sale, while an M&A advisor typically runs a more customized process for larger or more complex transactions and is more often paid a retainer alongside a fee tied to closing.
- Online marketplace vs broker listingAn online marketplace gives a business visibility to a wide pool of self-directed buyers, usually without actively marketing, screening or negotiating on the seller’s behalf, while a broker listing adds a professional running that process — confidential marketing, buyer screening, negotiation — often by placing the same listing on one or more marketplaces as part of the work.
- Buy-side vs sell-side representationSell-side representation means an advisor or broker is engaged by, and owes their duty to, the seller — marketing the business and negotiating for the best terms on the seller’s behalf — while buy-side representation means the advisor is engaged by, and works for, the buyer, searching for and evaluating targets and negotiating in the buyer’s interest instead.
- Retainer vs success feeA retainer pays an advisor for their time and work regardless of whether a deal ever closes, while a success fee — sometimes called a commission — pays them only when a transaction actually completes, which is why many engagements blend the two rather than relying on either structure alone.
- Using a broker vs selling it yourselfA business broker markets the sale confidentially, pre-screens buyers and manages the process in exchange for a commission usually paid at closing, while selling it yourself keeps that fee but leaves you to find buyers, negotiate and run a confidential process on top of operating the business day to day.
- Exclusive vs open listingAn exclusive listing gives one broker the sole right to sell your business for a defined term, typically earning them commission even on a buyer you find yourself, while an open listing lets you work with several brokers, or none, at the same time and pay commission only to whichever one actually brings the buyer who closes.
Buying
- Owner-operator vs absentee ownershipAn owner-operator runs the business personally, day to day, while absentee ownership depends on an existing management layer running it without the owner present — and that management layer, not the buyer’s own effort, is what a lender and a diligence process actually need to test.
- Buying a competitor vs entering a new marketBuying a competitor consolidates an existing market and can raise customer-overlap and, at real scale, competition-law considerations, while entering a new market through acquisition diversifies the business but hands the buyer an operation, customers and staff it does not yet understand.
- Buying a single-location vs a multi-location businessA single-location business is priced and diligenced as one operation with one lease and, often, one owner-manager, while a multi-location business adds a management layer above each site and a portfolio of separate leases — its value and risk do not simply multiply the single-site numbers by the site count.
- Buying the business vs buying the real estateBuying only the operating business means leasing the premises, from the seller or a new landlord, and keeping the purchase price and financing focused on the business itself, while buying the real estate too adds a second asset, a separate diligence track and a larger financing package to the same deal.
- Main street vs lower middle marketA main street business is typically small enough for a single owner-operator to run personally, priced and financed accordingly, while a lower middle market business is typically large enough to be run by a professional management team, with more formal financials, a more institutional financing process and a more involved legal deal structure.
- Buying a profitable business vs a turnaroundBuying a profitable business means paying for a proven, stable earnings history that a lender can readily underwrite, while buying a turnaround means paying less for a business with a demonstrated problem, financing it largely outside conventional lending, and taking on the execution risk of actually fixing what is broken.
- Buying a service business vs a product businessA service business is built mainly on people and client relationships, with few hard assets to finance against, while a product business carries inventory, equipment and a physical supply chain that a lender can lend against but that also bring their own diligence and working-capital demands.
- Keeping vs replacing the management teamKeeping the existing management team preserves institutional knowledge and reassures a lender that operations will not be disrupted, while replacing it removes people the buyer may not trust or need but adds transition cost, severance obligations and the risk of losing customer and staff relationships along with the departing managers.
- Self-funded search vs a funded search fundA self-funded search has the entrepreneur cover the search phase personally, keeping most of the eventual equity but carrying the financial risk alone, while a traditional search fund raises money from investors upfront to pay the entrepreneur a salary during the search, in exchange for those investors getting first right to fund — and a large equity share in — whatever business is eventually acquired.
- Refinancing vs assuming existing business debtRefinancing pays off the target business’s existing debt at or before closing and replaces it with new financing underwritten fresh in the buyer’s own name, while assuming existing debt has the buyer step into the seller’s loan as it stands, which requires the original lender’s consent and its own re-underwriting of the buyer as the new borrower.
- Buying a business vs starting oneBuying an existing business gets you revenue, staff, customers and a financing-friendly track record from day one, in exchange for paying for goodwill and inheriting however the business was actually run, while starting one gives you a clean slate and a lower upfront cost but no proven cash flow, which makes financing and early survival harder.
- Buying a franchise vs an independent businessBuying a franchise gets you a tested business system, brand recognition and ongoing franchisor support in exchange for ongoing royalties and restrictions on how you operate, while buying an independent business gives you full control over branding, suppliers and operations but no playbook, no franchisor support and no shared brand behind you.
Due diligence
- Quality of earnings vs auditA quality of earnings report analyzes and normalizes a business’s historical earnings specifically for a transaction and carries no auditor’s opinion, while an audit is a formal assurance engagement performed to recognized auditing standards that results in an independent opinion on the financial statements — the two are not interchangeable, and a QoE is not a form of audit.
- Closing adjustments vs the post-closing true-upClosing adjustments are the prorations and estimates — rent, property tax, prepaid insurance and an estimated working capital figure — used to calculate the wire that actually moves on closing day, while the post-closing true-up is the later reconciliation against confirmed final numbers that can send money back in either direction weeks or months afterward.
- Due diligence vs warranty protectionDue diligence is the buyer’s own investigation before closing, meant to catch problems while there is still time to price them, negotiate around them or walk away, while warranty protection is the contractual promise and remedy that covers whatever diligence did not or could not find — the two are complements, not substitutes, and leaning too hard on one changes what actually protects a buyer after closing.
Financing
- Seasonal vs year-round businessA seasonal business earns most of its cash in a concentrated part of the year and needs financing sized to survive its slowest months, while a year-round business generates comparatively steady cash flow that supports simpler, more predictable financing decisions.
- BDC vs chartered bank financingThe Business Development Bank of Canada is a federal Crown corporation that lends directly to businesses and is often more willing to finance goodwill, while a chartered bank is a deposit-taking institution offering full everyday business banking alongside acquisition lending — the two are typically complementary pieces of the same financing stack, not competing choices.
- Term loan vs line of creditA term loan advances a lump sum upfront on a fixed repayment schedule and is normally what actually funds the purchase price, while a line of credit is a revolving facility a business draws against and repays repeatedly, used to manage day-to-day working capital rather than to buy the business in the first place.
- Equipment financing vs a general term loanEquipment financing is secured specifically against the machinery or vehicles it pays for, with repayment usually matched to that equipment’s useful life, while a general acquisition term loan is typically secured by a blanket claim over the whole business and funds the purchase price as one number, without tying repayment to any single asset.
- Private lender vs bank financingA private lender is a non-institutional capital source — an individual, a fund or a specialty finance company — that can often move faster and accept a weaker track record or thinner collateral than a bank, in exchange for a higher cost of capital and less standardized terms, while bank financing is slower and more conservatively underwritten but generally the lower-cost, more heavily regulated option.
- Bringing in an equity partner vs debt financingAn equity partner provides capital in exchange for an ownership stake, sharing in the business’s risk and upside with no fixed repayment obligation, while debt financing provides capital in exchange for a fixed repayment schedule and interest, leaving ownership entirely with the buyer but requiring payments to be made whether or not the business performs.
- Asset-based lending vs cash-flow lendingAsset-based lending sizes a loan against the resale or liquidation value of specific collateral, such as receivables, inventory or equipment, and monitors that collateral on an ongoing basis, while cash-flow lending sizes a loan against a business’s ability to generate cash to service the debt, which suits a business whose value sits in recurring earnings rather than repossessable assets.
- Bank loan vs vendor financingA bank loan pays the seller the full agreed price at closing and puts a lender between buyer and seller going forward, while vendor financing has the seller carry part of the purchase price themselves, repaid by the buyer over time, which keeps the seller financially tied to how the business performs after they leave.
- CSBFP-backed vs conventional lendingThe Canada Small Business Financing Program has the federal government share a lender’s risk on a qualifying loan to an eligible small business, which typically makes financing more attainable on a smaller down payment, while conventional lending is the bank’s own money at the bank’s own risk appetite, without a government eligibility test to satisfy first.
Legal
- Lawyer vs notary in a Quebec business dealIn a Quebec business sale, a lawyer typically negotiates and drafts the purchase agreement and can represent one side’s interests in a dispute, while a notary acts impartially for all parties and holds the distinct authority to prepare authentic acts — most often needed when real property or a hypothec is part of the transaction.
- Buying a business with a partner vs aloneBuying alone keeps full control and full financial responsibility with one person, while buying with a partner pools capital and skills but requires a shareholders’ agreement — covering roles, decision-making, deadlock and exit — settled before closing, which is where most partnerships that later fail actually went wrong.
- Vendor take-back vs earn-outA vendor take-back is deferred purchase price — a fixed, already-agreed amount the seller finances through a promissory note repaid on a set schedule — while an earn-out is contingent consideration, an amount that is not fixed at all and is only paid if the business hits agreed targets after closing. One is a loan with a known balance; the other is a bet on the future that may pay nothing.
- LOI vs term sheetA letter of intent is written as a narrative statement of two parties’ shared intent to proceed on agreed terms, while a term sheet lays out the same kind of deal terms as a structured list without that narrative framing; the two labels are often used interchangeably in Canadian practice, and neither one decides which clauses actually bind the parties — the drafting does.
- Letter of intent vs purchase agreementA letter of intent sketches the main terms both sides have agreed to in principle, largely non-binding, before either party has fully verified the business, while the purchase agreement is the fully binding contract negotiated afterward, once due diligence is substantially complete, that actually governs the closing — and whatever the letter of intent left vague usually becomes the hardest thing to settle later.
- Deposit vs escrowA deposit is a specific sum a buyer pays, typically on signing the definitive agreement, to demonstrate commitment to the deal, while escrow is the neutral third-party arrangement that can hold that deposit — and much else besides, including a post-closing holdback or documents pending a condition — until the release terms both sides agreed to are actually met.
- Representations and warranties vs indemnitiesRepresentations and warranties are the seller’s contractual statements of fact about the business, while an indemnity is the separate promise to pay if one of those statements — or a specific named risk identified during diligence — turns out to be wrong or actually happens, and a deal can lean heavily on either one without the other doing very much work at all.
- Non-compete vs non-solicitA non-compete bars a seller from operating a competing business at all within a defined scope, while a non-solicit only bars approaching the specific customers, staff or suppliers named in it — a narrower restriction Canadian courts generally scrutinize less strictly, though how either is treated depends on the exact wording, the province, and whether it was given on a business sale or in employment.
- Earn-out vs holdbackAn earn-out pays the seller additional money after closing, calculated from how the business actually performs once the buyer owns it, while a holdback sets aside part of the price already agreed on at closing to cover claims the buyer might later bring against the seller — one is contingent upside, the other is contingent security.
Selling
- Blind listing vs named listingA blind listing markets a business without naming it, revealing the identity only after a buyer signs a non-disclosure agreement, while a named listing discloses the business’s identity from the start — the choice trades some buyer-response friction against the risk of staff, customers or competitors finding out before a deal closes.
- Auction process vs negotiated saleA structured auction process invites multiple prospective buyers to bid against each other on a set timeline, aiming to maximize price through competitive tension, while a negotiated sale works with one buyer at a time — usually faster and more private, but without direct competition to test the price against.
- Sale-leaseback vs selling the real estate with the businessA sale-leaseback sells the real estate separately, converting it into cash while the seller — or the buyer of the business — signs a lease to keep operating from it as a tenant going forward, while selling the real estate together with the business bundles both into a single transaction and a single buyer, ending the seller’s ongoing relationship with the property entirely.
- Full sale vs partial saleA full sale transfers all of the seller’s ownership at once and ends their financial stake and decision rights in the business, while a partial sale has the seller keep a minority or majority stake and usually stay involved as a co-owner alongside the buyer, trading some immediate liquidity for continued upside and, often, an ongoing say in how the business is run.
- Selling to a strategic vs a financial buyerA strategic buyer already operates in or near your industry and may pay more for the synergies your business creates with theirs, but may also fold it into their existing operation and change staffing, while a financial buyer is purchasing the business primarily for the cash flow itself and more often keeps it running largely as it already operates.
Succession
- Management buyout vs third-party saleA management buyout sells the business to the people already running it, typically financed against the business’s own track record and negotiated quietly with a buyer who already knows the operation, while a third-party sale takes the business to the open market, which usually tests the price against more buyers but takes longer and requires broader confidentiality management.
- Passing the business to family vs selling itPassing a business to family keeps ownership within the family and, under specific rules for a genuine intergenerational transfer, may qualify for tax treatment similar to an arm’s-length sale, while selling on the open market tests the price against real outside buyers but ends the family’s direct connection to the business.
- Winding up vs selling the businessWinding up closes the business down and liquidates whatever it owns, asset by asset, for whatever each piece will fetch on its own, while selling keeps the business running as a going concern under a new owner and can capture value for goodwill, staff and customer relationships that a liquidation cannot realistically collect.
Tax
- Share sale vs hybrid saleA share sale transfers the whole corporation as one unit, while a hybrid sale layers an asset-level carve-out, or a pre-closing reorganization, onto a share sale so specific assets, liabilities or licences move differently from the rest of the company — reached for when neither a clean share sale nor a clean asset sale can satisfy something material to one side of the deal.
- Asset sale vs share saleAn asset sale transfers the individual assets and liabilities a buyer agrees to take, sold out of the seller’s corporation, while a share sale transfers ownership of the corporation itself, including everything already inside it. The two produce different tax results for the seller and different liability exposure for the buyer, which is why the structure is negotiated rather than simply chosen by whoever is selling.
Valuation
- Accountant vs business valuatorAn accountant prepares and reviews a business’s financial statements and tax filings and can offer an informal read on value, while a Chartered Business Valuator is credentialed specifically to produce a defensible, evidence-based valuation report using recognized methodology — a materially different scope and level of rigour.
- Business valuation vs real estate appraisalA business valuation values the operating business — its earnings power, customer relationships and goodwill — as a going concern, typically prepared by a credentialed business valuator, while a real estate appraisal values only the land and building, prepared by an accredited property appraiser using entirely different methods and evidence.
- Working capital peg vs cash-free debt-freeA cash-free, debt-free structure is the market convention that the seller keeps the cash on the balance sheet and clears the debt before closing, while a working capital peg is a separately negotiated target for the operating assets — receivables, inventory and payables — that has to remain in the business, and the first does not automatically protect a buyer against the second being stripped down before closing.
- SDE vs EBITDASeller’s discretionary earnings adds back the owner’s full compensation on the assumption that a new owner-operator will run the business personally, while EBITDA assumes the business already pays market-rate management and adds back only interest, tax, depreciation and amortization. The two measures describe different sizes of business and are not interchangeable without adjustment.
- Leasing vs owning your premises, when you sellIf you lease your premises, only the business itself is for sale and the lease has to be assigned or renewed for the buyer to take over, while if you own the real estate, you can bundle the property into the sale, sell it separately, or lease it back to the buyer — each option changes the price, the financing and who the buyer has to satisfy to close.
- A multiple-based estimate vs a formal appraisalA multiple-based estimate applies a general industry range to a business’s earnings and can be produced quickly and at low cost, while a formal appraisal is a credentialed, evidence-based report built specifically for that business — the two serve different purposes, and a quick multiple is not a substitute for an appraisal when real money, tax or a dispute depends on the number.