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Important Points to Consider When Buying a Manufacturing Business

Oct 11, 2021 by Mark Dingley

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Whether you’re looking to enter the manufacturing industry or you’re already well established in the sector, buying an existing manufacturing business can be an excellent investment as well as a strategy for growth.

As with any industry, however, when buying a business there is a multitude of legal factors that need to first be considered. This is why it’s a good idea to get advice for a legal professional before starting the search.

Bearing that in mind, let's look at the important points to consider when buying a manufacturing business.

Due Diligence

When purchasing a business, it’s essential to know exactly what you’re paying for. This means thoroughly checking all the details and ensuring that the numbers add up. Keep in mind that the vendor wants to sell their business for as much as possible, so it’s up to you to ensure that everything they tell you is accurate. As such, there will be numerous documents that you need to look over and analyse.

You can also get an idea how well the business is positioned by checking out the local competition. If most of the businesses’ revenue come from a couple of larger clients, it’s also important to have a think about what you would do if the business lost them.

Thorough Checks

You need to ensure that you’re paying a fair price for the assets you’ll be receiving as a part of the sale; the value of the plant, as well as all the equipment and stock it contains, form a big part of the overall cost.

Ensure that you check the age and condition of all equipment and the quantity as well as the quality of any stock. Don’t forget about intellectual property, like the website and any patents that the business may own. And don’t just take the vendor’s word on the value of these things either (remember that they’re trying to get the best price possible). It’s possible to have these things inspected by a third party if you want to know for sure.

Necessary Certifications

In order to operate the manufacturing business you’re hoping to purchase, certain permits or certifications may be required. If the business involves the packaging of food and beverages, for example, there will be certification requirements to ensure that this is done is a safe manner. Ensure that you’ve checked relevant legislation in your state and the industry as a whole.

Disputes & Resolutions

Unfortunately, disputes can arise for various reasons but they typically relate to facts about the business and how much it’s worth. Some common examples include:

The best way to avoid disputes is to employ the services of a business lawyer to draft any documents, as well as thoroughly check over the contract and all other documents before the purchase is finalised.

If a dispute still arises, a lawyer can also help you to resolve it. They’ll be able to advise the best course of action according to your situation, including what dispute resolution avenue would be most appropriate.

Legal Advice

This is the most important part of the purchasing process. If you’re unsure about anything at all, your lawyer will be able to point you in the right direction. As we’ve already covered, they’ll also be essential for drafting and looking over any important documents to ensure that everything is in order.

If you’re in the market for an existing manufacturing business, ensure that you seek the advice of a good business lawyer. They will be able to walk you through every step of the process and ensure that there aren’t any surprises.