BUYING A MANUFACTURING BUSINESS? 4 KEY POINTS TO CONSIDER

There are many factors to consider when purchasing a manufacturing business in order to protect the continuity of the business following settlement. Here we cover some of the important issues (amongst others) that a buyer should discuss with their business lawyer before signing a contract.

Local & State Government Approvals

It is important to ascertain what licenses and approvals are required from the local government in order to conduct the business from its premises. A buyer will also need to ascertain whether the business currently has these licenses and approvals, whether they are transferable and whether the buyer will be able to continue to meet any conditions contained in the licenses and approvals.

Manufacturing businesses are generally required to meet many legal obligations under state and local laws in relation to fire safety, workplace health and safety, and environmental laws such as noise reduction and trade wastes. Many manufacturing business will require multiple licenses and certificates from their local government prior to being able to operate the business. It is therefore imperative that the contract is made conditional upon the approval or transfer of all necessary licenses by way of a carefully worded special conditions being inserted into the contract.

Lease, Plant & Equipment

If the premises are leased, whether there is to be an assignment of an existing lease or the negotiation of a new lease, it is important to ensure that the premises are fit for the purpose of the business, particularly in regard to structure and floor load bearings. Also, due to many manufacturing businesses having large fixed plant and equipment, attention should be paid to the length of the lease and whether any options for renewal are satisfactory.

It is also vital to ascertain the working order, age and repair requirements of all plant and equipment. If the machinery itself is imported, are there locally trained technicians that can repair the machinery and are spare parts available locally? Are all warranties for the machinery capable of being transferred?

As the premises, plant and equipment are vital to the business, it is imperative that a special condition is inserted in the contract to ensure that the buyer has the time to have the machinery and premises inspected by qualified professionals. Without such a special condition the contract will not be subject to the buyer being satisfied that the premises is fit for the intended purpose; and that all the plant and equipment is in good working order, is suitable for the intended purpose and that any warranties can be transferred to the buyer. Also, a special condition should be inserted to ensure that the contract is subject to the buyer’s satisfaction with the proposed lease. Read more at: http://www.business2sell.com.au/blogs/2013/11/buying-a-manufacturing-business-4-key-points-.php 

Author:
This article is written by a lawyer "Joe Kafrouni" for Business2sell