Anonymised, illustrative composite. A specialty packaging manufacturer had bought 100% of one raw material from a single supplier for nine years under an exclusive-dealing clause priced roughly 9% above the best available alternative. The buyer's model capitalised that gap as a permanent drag on EBITDA. It is not permanent — it is reviewable.
At a glance
The target manufactured specialty protective coatings for industrial packaging and had, since 2017, sourced the resin base for its flagship product line from a single supplier under a written exclusive-dealing agreement: the target could not buy the resin, or any substitute the supplier designated as competing, from anyone else. In exchange the target received volume pricing and guaranteed supply during two separate industry shortages. Nine years in, the guarantee had stopped mattering and the pricing had not kept pace with the market — the target's own procurement team estimated the exclusive price ran roughly 9% above what two qualified alternative suppliers were quoting.
The buyer's first-pass model treated the 9% gap the way it would treat any structural cost disadvantage: capitalise it at the deal multiple and take it off the price. At 5.8× EBITDA that is roughly $4,988,000 — a discount the seller resisted, arguing it was ordinary market friction rather than something the target could actually do anything about. Both sides were arguing about how permanent the disadvantage was without asking the question that decides it: is a nine-year, single-supplier exclusivity at an above-market price something the law lets stand indefinitely, or is it conduct a bound customer can have stopped?
$27,000,000 trailing revenue, $4,100,000 EBITDA, offer at 5.8× before adjustment ($23,780,000 enterprise value). The 9%-of-input-cost overpayment ran to roughly $860,000 a year on the volumes involved. Capitalised as a permanent drag at the same multiple, that is the $4,988,000 the buyer's first model discounted off the price — more than a full turn of EBITDA, on a cost that had never actually been tested as fixable.
Competition Act s.77(1) defines exclusive dealing as, among other things, “any practice whereby a supplier of a product, as a condition of supplying the product to a customer, requires that customer to… deal only or primarily in products supplied by or designated by the supplier or the supplier's nominee”. A single-source resin agreement with no right to buy a competing product is exactly that.
The remedy is s.77(2), and it is not framed around the target's cost line at all. It provides that “where, on application by the Commissioner or a person granted leave under section 103.1, the Tribunal finds that exclusive dealing or tied selling, because it is engaged in by a major supplier of a product in a market or because it is widespread in a market, is likely to” impede entry or expansion of a firm, impede introduction of a product, or “have any other exclusionary effect in a market, with the result that competition is or is likely to be lessened substantially, the Tribunal may make an order” prohibiting the supplier from continuing it. Nine years of exclusive sourcing from one resin supplier, at a persistent price gap two rival suppliers were prepared to beat, is squarely the fact pattern the remedy exists for — whether or not the target's own procurement team had ever framed it that way.
And the target did not have to wait for the Commissioner to notice. Section 103.1(1) provides that “any person may apply to the Tribunal for leave to make an application under section 74.1, 75, 76, 77, 79 or 90.1”. A bound customer — the target itself — is exactly the kind of person the leave route was built for. That converts the 9% gap from a cost the buyer had to price forever into a position the buyer, once it owned the target, could take active steps to remedy.
This is a different lever from the target's own supplier arrangements to its dealers, which turn on a different subsection entirely — s.77(3)'s market-restriction remedy governs where the target is confining its own customers to territories, not where the target itself is the one locked in.
Counsel reframed the negotiation rather than simply arguing over the size of the discount. The purchase agreement priced the arrangement as remediable, not permanent: the parties split the difference on the price adjustment, and the seller agreed to a post-closing cooperation covenant confirming the buyer's unrestricted right, as new owner, to pursue relief under s.77(2) and s.103.1 or to renegotiate supply terms with the incumbent supplier without the seller's involvement or objection. The seller also represented that no complaint, inquiry or proceeding concerning the arrangement existed as of closing.
Accepting the full $4,988,000 discount as a permanent feature of the business overpays the seller for the buyer's own unwillingness to test the position, and it is the wrong number twice over: if the exclusivity is in fact vulnerable to an order, the true cost is not 9% forever, it is 9% for however long it takes to bring and win an application — a period, not a perpetuity. Modelling a legal remedy as an unfixable cost line is the same category of error as modelling a fixable cost line as a legal remedy: either way, the price paid does not match the risk actually being taken.
The target's own management, asked why the supply relationship had never been renegotiated, said the supplier had “always been very firm” about the exclusivity. Nobody on either side of the deal had asked a competition lawyer whether “firm” had a legal name.
A 30-minute call is enough to tell you whether AI pays for itself here.
Canadian small-business transaction data is not published anywhere, so most valuations in this country quote an American benchmark. The Deavo–Treadstone Acquisition Index is a daily record of Canadian listings built to replace that: asking-price distributions by province and city are published now, and days on market, departure rates and asking-to-sale spreads follow as the series lengthens. Leave an email and we will tell you as each measure lands.
No pitch, no listings. One email when the first report lands.
