The Purchase and Sale Agreement (PSA) — also called the Asset Purchase Agreement (APA) for asset deals or the Share Purchase Agreement (SPA) for share deals — is the legally binding contract that governs the complete acquisition transaction. It replaces the LOI and becomes the document of record for every right and obligation of the buyer and seller. A Canadian SMB PSA typically covers: definition of purchased assets or shares, the purchase price and payment mechanics (cash at closing, VTB note, holdback, earn-out), representations and warranties by both parties, indemnification provisions including caps and baskets, conditions to closing, covenants, transition obligations, non-compete and non-solicitation restrictions, dispute resolution, and governing law. The quality of the PSA directly determines how protected the buyer is from post-closing surprises. Buyers should work with a Canadian M&A lawyer who regularly does SMB transactions — a general-practice lawyer will miss deal-specific provisions that an experienced M&A lawyer insists on. BizBuy.ca reviews PSA drafts to confirm that business terms match the negotiated deal and that buyer protections are commercially adequate.
The APA for a Richmond printing shop runs 42 pages. Key buyer protections include an 18-month survival period on reps and warranties, a $150,000 indemnification basket, a $600,000 indemnification cap, a $75,000 holdback released after 18 months, and a covenant from the seller not to compete within 50 kilometres for five years.
Legal concepts are where buyers most commonly get hurt in Canadian acquisitions. Ali flags these issues during LOI negotiation so your lawyer is focused on the right risks from day one.