Successor employer

This is the point buyers most often miss. In an asset sale the seller’s corporation stays behind, so it feels as though employment starts fresh. Employment standards legislation across Canada generally says otherwise: where the business continues, service continues with it, and the buyer inherits the clock.

Why it costs money

Termination and severance entitlements scale with length of service. A buyer who lets go a long-tenured employee six months after closing may be liable as though that person had worked for them for fifteen years. On a workforce of any size, that exposure can exceed the working capital in the deal.

What buyers do about it

• Quantify accumulated entitlements during diligence, employee by employee, not as a lump estimate
• Negotiate a purchase price adjustment or indemnity for the inherited liability
• Decide before closing who is being kept, and price the rest
• Take advice on whether new employment agreements can be offered, and what consideration they require