The Business Sale That Fell Apart Over a Share Purchase Agreement
The story came from a post in Reddit's business broker community titled Lawyer Just Killed a Deal.
According to the broker, the transaction had been progressing smoothly.
The buyer wanted to purchase the business.
Due diligence appeared satisfactory.
Both sides seemed aligned on the transaction.
The proposed acquisition was structured as a share purchase, meaning the buyer would acquire shares of the company rather than purchasing selected business assets.
The Letter of Intent included a condition requiring both parties to agree on the final Share Purchase Agreement (SPA) before the buyer removed the conditions.
This was important because the buyer's deposit would become non-refundable once those conditions were waived.
The buyer wanted to know exactly what they were agreeing to before putting that money at risk.
That sounds reasonable, doesn't it?
The Seller's Lawyer Refused to Negotiate Before Conditions Were Removed
The buyer's lawyer drafted the Share Purchase Agreement and sent it to the seller's lawyer.
That's when the disagreement began.
According to the broker, the seller's lawyer refused to negotiate the SPA until after the buyer removed the conditions.
Think about what that meant.
The buyer was being asked to make their deposit non-refundable before knowing whether the final binding purchase agreement would contain acceptable terms.
Share purchase agreements can be complicated documents.
They often include representations, warranties, indemnities, closing obligations, and other provisions that can materially affect the parties' rights and responsibilities.
I've seen purchase agreements that were twenty pages long.
I've also seen agreements that were a hundred pages long.
These are not documents you should agree to without understanding their contents.
The buyer understandably didn't want to waive the condition before the final agreement was settled.
Meanwhile, the seller's lawyer continued insisting that the conditions be removed first.
The transaction stalled.
Then, on the deadline for removing the conditions, the seller announced that something didn't feel right and decided not to proceed.
The deal died.
The broker was understandably frustrated.
But was the lawyer entirely responsible?
I'm not convinced we have enough information to say that.
Problem #1: The LOI Created an Unnecessary Deadline Trap
Let's start with the Letter of Intent.
When I worked as a business broker, and when I teach people how to buy businesses through Business Buyer Advantage, I generally recommend beginning with a non-binding offer or agreement, with appropriately drafted exceptions for any provisions intended to be binding.
Why?
Because buying a business involves significant investigation and negotiation.
The buyer needs an opportunity to evaluate the company.
Financing may need to be arranged.
And the final legal documentation must be negotiated.
In the Reddit story, the LOI included conditions covering these matters.
But there was one important structural problem.
The agreement established a deadline when the conditions had to be removed, after which the deposit would become non-refundable.
That structure resembles what we often see in residential real estate transactions.
For example, a buyer might have ten days to complete a home inspection.
Once the inspection condition is removed, the transaction proceeds under the agreed contract.
But buying a business is different.
The final legal documentation can be considerably more complicated.
And sometimes the parties need additional time to work through the details.
Why I Would Separate the Conditions
Here's how I approached this when I was a business broker.
I would establish specific deadlines for certain activities.
For example:
A defined period for completing financial and operational due diligence
A deadline for arranging financing, where applicable
Timeframes for other agreed investigations or approvals
But I would treat approval of the final purchase documentation differently.
The transaction would remain subject to both parties and their legal advisors agreeing on the final documents.
That condition wouldn't necessarily disappear simply because the due diligence deadline had passed.
This distinction is important.
The buyer might complete due diligence and decide the business is acceptable.
But if the lawyers subsequently discover that they cannot agree on essential contractual terms, the buyer should not automatically lose their deposit merely because the earlier investigation period has expired.
Of course, the precise rights and obligations depend on how the agreement is drafted and the applicable law.
That's why the structure needs to be established carefully with qualified legal advisors.
Why Buyer Confidence Matters
When I was working with business sellers, I regularly emphasized the importance of making buyers feel comfortable proceeding.
As I explained:
"we have to make it absolutely certain that they understand that their deposit money is never at risk" —David C. Barnett
That reflects the buyer-protective approach I preferred in structuring transactions.
It doesn't mean every deposit in every business acquisition is legally refundable.
The agreement must expressly establish the relevant rights and conditions.
The principle is that buyers need to understand their financial exposure before committing to the transaction.
If they believe they're being forced into an uncertain legal arrangement, they may decide not to make an offer or proceed with the deal.
Problem #2: The Business Broker Lost Control of the Transaction Process
The next issue concerns the broker's role.
One thing that stood out to me in the Reddit story was how the communication appeared to be happening.
The buyer's lawyer drafted the Share Purchase Agreement.
The document went to the seller's lawyer.
The seller's lawyer then communicated with the seller.
And the broker seemed to be learning about the resulting problems after they developed.
Now, we don't know every conversation that took place.
The broker may have been more involved than the Reddit post suggests.
But the story raises an important question.
Who was coordinating the transaction and making sure everyone understood what needed to happen next?
When I worked as a business broker, I considered that coordination a central part of my job.
Why I Preferred to Coordinate Communication Between the Lawyers
In the transactions I handled, I usually had direct contact with the buyer, seller, and both parties' legal advisors.
I would discuss the LOI with the lawyers and help establish expectations for the work ahead.
I also preferred to review draft purchase agreements before they were circulated between the legal teams.
Some lawyers initially found that approach unusual.
But after working with me, many came to appreciate the efficiency.
The reason was simple.
I wanted to catch obvious differences between the LOI and the draft agreement before those differences created unnecessary negotiations.
This wasn't about replacing the lawyers or providing legal advice.
It was about managing the business terms and keeping the transaction organized.
The lawyers remained responsible for advising their respective clients and negotiating the legal protections.
Problem #3: The Purchase Agreement Might Not Match the LOI
Here's something that surprises many first-time business buyers.
Lawyers don't necessarily draft every purchase agreement from a blank page.
They often begin with an existing template or precedent document.
That's perfectly understandable.
Business purchase agreements contain many recurring provisions, and using an established starting point can save time.
But it also creates opportunities for mistakes.
The Problem With Boilerplate Contracts
I've seen agreements containing provisions that didn't relate to the actual transaction.
Why?
Because the lawyer started with a template and didn't remove everything that was irrelevant.
I've even encountered draft agreements containing the names of companies from other transactions.
That happens when someone reuses an earlier document and doesn't update it completely.
The bigger problem is that a standard template may contain terms that differ from what the buyer and seller agreed upon in their LOI.
And if nobody identifies those differences early, they can lead to unnecessary disagreements.
How I Reviewed Draft Purchase Agreements
My approach was straightforward.
First, the buyer's lawyer would prepare the initial agreement.
Then I would compare it with the LOI.
I would look for obvious inconsistencies involving matters such as:
Purchase price and payment terms
Seller financing arrangements
Assets or shares being transferred
Closing conditions
Transition and training commitments
Other commercial terms previously negotiated
If something appeared inconsistent, I would raise it with the drafting lawyer.
Once the business terms appeared aligned, the document could move forward for the seller's legal review.
Again, this was a commercial consistency check.
It wasn't a substitute for legal review, and the broker should never interfere with a lawyer's professional judgment or a client's ability to obtain independent legal advice.
The objective was to identify avoidable problems before they turned into expensive disputes.
Problem #4: The Seller May Have Been Confused About What Was Happening
Now let's consider the seller's perspective.
According to the Reddit post, the seller became increasingly emotional, confused, and stressed as the lawyers disagreed.
That isn't surprising.
Selling a business can be one of the largest financial transactions of someone's life.
The owner may have spent decades building the company.
They may be retiring or making a major lifestyle change.
And now they're hearing conflicting information about deadlines, deposits, conditions, and legal agreements.
Without clear communication, that situation can become overwhelming.
Why Setting Expectations Matters
Imagine a more coordinated process.
The broker has reviewed the draft agreement for consistency with the LOI.
The buyer's lawyer has addressed the commercial discrepancies identified.
The broker then informs the seller that the draft is ready for the seller's lawyer to review.
The seller understands what stage the transaction has reached.
They know the legal advisor is being asked to examine the document, identify concerns, and provide advice about the proposed terms.
That doesn't eliminate disagreements.
But it gives everyone a clearer understanding of the process.
The broker can help explain the commercial context while the lawyer advises the seller on the legal implications.
When those roles are properly coordinated, there's less opportunity for confusion.
Why the Broker Needs to Be the Transaction Coordinator
As I explain:
"the broker really is supposed to be the quarterback in managing all this stuff." —David C. Barnett
That doesn't mean the broker should control the lawyers' independent advice or prevent direct lawyer-to-lawyer communication when it is needed.
It means someone needs to keep track of the transaction's progress, outstanding commercial issues, responsibilities, and deadlines.
The broker is often well positioned to coordinate those activities.
Without that coordination, relatively small disagreements can become major obstacles.
And when the parties are already under emotional pressure, those obstacles can threaten the entire transaction.
Problem #5: The Parties May Have Hired Lawyers Without the Right Experience
The Reddit broker concluded that the seller's lawyer may have approached the business sale too much like a real estate transaction.
That raises a broader issue.
Not every lawyer has the same experience with small business acquisitions.
A lawyer may be excellent at residential real estate transactions.
They may have helped you purchase a home, prepare a will, or handle a rental property.
But that doesn't automatically mean they're experienced in negotiating share purchase agreements or complex business acquisitions.
These transactions can involve specialized issues.
For example, a share purchase may require careful consideration of the company's existing liabilities, representations and warranties, indemnification provisions, and other legal risks.
An asset purchase may involve different questions about which assets and obligations are being transferred.
The structure matters.
And the legal advisor should understand it.
Why Familiarity Isn't Enough
Many business owners choose lawyers based on existing relationships.
They've worked with someone before.
They trust them.
And they assume that person can handle the business sale.
Sometimes that's perfectly reasonable.
But in other situations, the lawyer may not regularly work on acquisitions.
That lack of familiarity can lead to delays, unnecessary disagreements, or missed issues.
For a transaction that may represent the seller's retirement savings or the buyer's largest investment, choosing an appropriate legal advisor is important.
How to Choose the Right Lawyer for a Small Business Acquisition
In my Exit Ready program, I provide business owners with guidance on evaluating business brokers before hiring one.
That includes using a structured interview process to understand the broker's experience and capabilities.
I think business brokers could apply a similar approach to helping clients evaluate legal advisors.
For example, a broker could prepare a guide explaining what buyers and sellers should look for when hiring a business transaction lawyer.
The guide could include questions like these.
Questions to Ask Before Hiring a Business Transaction Lawyer
1. How many small business acquisitions or sales have you handled in the past year?
You want to understand whether business transactions are a regular part of the lawyer's practice.
2. How often do you represent buyers versus sellers?
Experience on both sides can help a lawyer understand the competing concerns involved in negotiating a transaction.
3. How many share purchases and asset purchases have you handled?
These transaction structures involve different considerations.
Relevant experience matters.
4. What is your process for reviewing an LOI and preparing the final purchase agreement?
This can help reveal how the lawyer approaches negotiations and manages the transition from preliminary terms to binding documents.
5. How do you coordinate with business brokers, accountants, lenders, and other advisors?
A business acquisition often involves multiple professionals.
Clear communication between them is important.
6. How do you identify and resolve disagreements without unnecessarily delaying the transaction?
You want an advisor who can protect your interests while also helping you understand the practical implications of different options.
7. What legal work is likely to be required, and how are your fees structured?
Legal costs can increase when negotiations become prolonged.
Understanding the expected scope and billing arrangements can help avoid surprises.
8. Have you handled transactions of a similar size and complexity?
A lawyer experienced primarily in very large corporate acquisitions may not necessarily approach a small owner-operated business sale in the most practical way.
The objective isn't simply to hire the lawyer with the most impressive credentials.
It's to find someone whose experience fits the transaction you're trying to complete.
How Business Brokers Can Help Clients Select Legal Advisors
When I was working as a business broker in Moncton, I regularly dealt with several local lawyers.
Over time, I developed a sense of who had experience with these transactions and who was easier to work with.
When clients asked for recommendations, I could provide several names for them to consider.
Today, the market is changing.
Buyers and sellers increasingly participate in transactions involving people in different cities or regions.
Some lawyers now market their business acquisition services across much larger geographic areas.
That means buyers and sellers may have more options.
But it also makes evaluating the advisor's qualifications important.
A broker who provides clients with a structured attorney-selection guide could help them ask better questions and make more informed decisions.
The final choice of legal advisor should remain with the client.
And each party needs independent advice appropriate to their interests.
Could the Seller Have Used the Lawyer to Escape the Deal?
There's another possibility worth discussing.
What if the seller had already decided they didn't want to sell?
The Reddit post says the seller ultimately withdrew because the situation didn't feel right.
That may have been a genuine emotional reaction to the legal disagreement.
But it's also possible the seller had developed doubts earlier.
We simply don't know.
I've encountered situations where a party wanted to withdraw from a transaction but was reluctant to say so directly.
Sometimes the legal process becomes the place where those concerns surface.
Why a Seller Might Not Want to Withdraw Directly
Depending on the listing agreement, a seller might face contractual consequences for withdrawing a business from the market while an active offer exists.
There could be provisions dealing with fees or compensation owed to the broker.
The exact consequences would depend on the agreement.
That creates a possible incentive for a seller to avoid being the person who openly ends the transaction.
In some circumstances, an advisor may be asked to take a negotiating position that makes the transaction difficult to complete.
I'm not saying that's what happened in this Reddit story.
There isn't enough evidence to establish that.
But it's one possible explanation for why the seller's lawyer appeared unwilling to negotiate the final agreement before the condition deadline.
Why You Shouldn't Automatically Blame the Lawyer
A lawyer's position may reflect legal advice, instructions from their client, or concerns that aren't fully described in a third-party account.
We don't have the complete LOI.
We don't have the correspondence between the lawyers.
And we don't know everything the seller was thinking.
So blaming the attorney alone may overlook the real problem.
The more useful question is how the transaction could have been structured and coordinated to reduce the chances of this situation developing.
Two Changes I Would Make to Prevent This From Happening Again
If I were advising the broker who shared this story, I would focus on two practical improvements.
1. Help Clients Choose Lawyers With Relevant Business Transaction Experience
Don't assume that every lawyer is equally familiar with small business acquisitions.
Create a structured guide that helps buyers and sellers evaluate potential legal advisors.
Encourage them to ask about experience with share purchases, asset purchases, due diligence, purchase agreements, and transaction coordination.
This can reduce the risk of delays caused by unfamiliarity with the process.
It also helps clients understand why selecting the right legal advisor matters.
2. Separate Due Diligence Deadlines From Final Agreement Approval
This is the structural change I consider especially important.
A buyer can have a defined period to complete due diligence.
They can also have a deadline to arrange financing.
But approval of the final purchase documentation can be treated as a separate condition.
That way, completing due diligence doesn't automatically mean the buyer must accept legal terms that haven't been negotiated.
The agreement should clearly establish what happens to the deposit if the parties cannot agree on the final documentation.
As I mentioned earlier, the precise drafting must be handled by qualified legal advisors.
There are legitimate competing concerns here.
A seller may not want to remain committed indefinitely while a buyer continues negotiating.
And a buyer needs protection against being forced to accept unacceptable legal terms.
The goal is to establish a process that manages both parties' risks without creating an unnecessary deadline trap.
Why This Matters for Both Buyers and Sellers
It's easy to view a failed transaction as simply a disagreement between two parties.
But the consequences can be significant.
For the buyer, a failed deal may mean lost time, legal expenses, due diligence costs, and a missed opportunity.
For the seller, it may mean restarting the sale process after months of negotiations.
The business may have experienced disruption.
Employees may have become concerned.
And the owner may be forced to delay retirement or another important life decision.
That's why transaction management matters.
A good business sale process isn't simply about finding a buyer and agreeing on a price.
It's about moving the transaction from initial agreement to closing while controlling risk.
That requires appropriate legal advice, clearly structured conditions, organized communication, and realistic expectations.
The Hidden Cost of Poor Communication Between Advisors
Legal costs can become substantial when advisors repeatedly exchange drafts containing unresolved commercial disagreements.
Imagine a buyer's lawyer preparing a purchase agreement using standard provisions.
The seller's lawyer reviews it and identifies several terms that don't match the LOI.
They respond with revisions.
The buyer's lawyer reviews those revisions.
Then another draft is prepared.
Each exchange takes time.
And each lawyer may be billing for that work.
Some negotiation is unavoidable and necessary.
But unnecessary discrepancies between the LOI and the purchase agreement can often be identified earlier.
That's one reason I preferred to review the commercial terms before the legal teams became involved in extensive back-and-forth negotiations.
The goal wasn't to eliminate legal scrutiny.
It was to make the process more efficient.
A well-coordinated transaction can help everyone focus on the issues that genuinely require negotiation.
What Buyers Should Do Before Removing Conditions
If you're purchasing a business, don't treat condition removal as a minor administrative step.
Before waiving conditions, you need to understand what you're agreeing to and what happens afterward.
In particular, make sure you and your lawyer have addressed the following:
The final agreement: Have the essential purchase terms and legal protections been agreed upon, or is approval of the final documentation still an outstanding condition?
The deposit: Under what circumstances does it become non-refundable, and what happens if the transaction cannot close?
Due diligence: Have you completed the investigations necessary to understand the business and its risks?
Financing: Are the necessary funds available, and have any required financing conditions been satisfied?
Closing obligations: What must each party do before the transaction can be completed?
Remaining contingencies: Are there unresolved issues that could prevent closing or create additional financial exposure?
The answers will depend on the transaction documents and applicable law.
But the principle is straightforward.
Don't waive contractual protections without understanding the consequences.
Your lawyer should help you evaluate those risks before you make a binding commitment.
Final Thoughts: Don't Let a Poorly Managed Process Kill a Good Business Deal
The Reddit story raises an interesting question.
Did the seller's lawyer kill the deal?
Maybe the lawyer contributed to the breakdown.
Maybe the seller got cold feet.
Or maybe the transaction was structured in a way that created unnecessary pressure at exactly the wrong moment.
We don't have enough information to know for certain.
But there are lessons here for anyone buying or selling a small business.
The LOI needs to establish a sensible path toward closing.
The buyer shouldn't be forced into unreasonable uncertainty about the final agreement and deposit.
Both parties should have legal advisors who understand the type of transaction involved.
And someone needs to coordinate the process so that commercial disagreements don't turn into avoidable crises.
As I explain:
"a lot of the time that lawyers spend in going back and forth with each other can be avoided if the paperwork actually matches the LOI to start with." —David C. Barnett
That's one of the biggest takeaways from this situation.
Good transaction management doesn't eliminate every disagreement.
But it can prevent unnecessary problems from becoming deal-killers.
And when you're dealing with the sale of a business that someone has spent years building, that's worth taking seriously.
Get Help Buying or Selling a Small Business
If you're preparing to sell your business, my team and I can help you understand the process before you meet your first buyer.
Through our zero-commission business selling program, we can help you understand what your business may be worth, prepare the information package buyers need, run confidential advertising, and coordinate the selling process.
You can also explore my Exit Ready program and the second edition of my book, How to Sell My Own Business, to learn more about preparing for a successful exit.
Explore How to Sell My Own Business
If you're planning to buy a business, my Business Buyer Advantage program provides online training, group coaching, and consulting services covering the acquisition process.
Learn how to evaluate opportunities, structure offers, manage due diligence, and understand the risks involved before committing your money.
Explore Business Buyer Advantage
For more articles, videos, and educational resources about buying, selling, financing, and managing small and medium-sized businesses, visit my website.
Visit DavidCBarnett.com
If you're interested in the financial side of business transactions, including how owners, buyers, sellers, lenders, and advisors should think about company and equipment values, explore my book Business and Asset Values.
Learn More About Business and Asset Values
And if you'd like more practical insights about small business acquisitions and dealmaking, join my email list for updates, stories, and 7 free gifts.
Join David C. Barnett's Email List
