What should I ask about a food co-packer’s biggest client leaving?

When one customer fills much of a plant, its departure is the biggest risk in the deal. Ask the seller to be direct about it: how long the client has been with the plant, how the relationship started and whether anything is in writing. Find out who deals with the client, and whether it is the owner personally.

Ask about the reasons a client might leave. Are they growing and thinking of building their own facility? Have they had quality complaints? Are their prices under pressure? The answers tell you whether the risk is theoretical. Then plan for the loss. Look at the financial statements and ask what the plant would earn without that client, how quickly other work could replace it and what costs would remain. Ask whether the client has been told about the sale and how they responded. Consider asking your lawyer how the purchase agreement can reflect this risk. Also ask about any food licensing the plant holds, since clients often check it.

Key takeaways

• Ask how much of the work this client represents and whether a contract exists.
• Find out why the client might leave and whether they know of the sale.
• Work out how the plant would manage without them.
• Ask what the seller has already done to find other clients and how soon that client could realistically move, and what came of it.