Auto salvage and recycling yard due diligence

By the time an offer is signed, evaluating the opportunity is done and verifying it begins. A salvage yard concentrates its real risk in a fairly small number of specific checks, and most of the deals that fall apart at this stage do so because one of them turned up something the buyer hadn’t priced in, not because the financials were wrong.

Request the compliance history from the regulator directly, not from the seller

A seller’s own file on their environmental standing can be incomplete, out of date, or simply curated. Requesting the compliance history directly from the environmental regulator — in Ontario, confirming the status of the site’s Environmental Compliance Approval under the Environmental Protection Act and whether any compliance orders are outstanding — gives a buyer an independent answer rather than the seller’s summary of one.

Commission or review the environmental site assessment, and understand what a finding actually means

A Phase I assessment reviews the site’s history and current condition for signs of contamination; a Phase II, triggered by anything the Phase I flags, involves physical soil and groundwater testing. A clean Phase I generally lets a deal proceed on schedule. A Phase II finding of contamination does not automatically kill a deal, but it typically means remediation cost has to be negotiated into the price, financing becomes harder to arrange, and the closing timeline extends — all of which should be treated as real deal terms, not paperwork to push past.

Run a lien search before assuming the equipment and inventory are clear

A Personal Property Security Act search against the corporate seller reveals registered security interests against equipment, vehicles and inventory that a buyer needs to see cleared, assumed or accounted for at closing. Ontario also has a separate Repair and Storage Liens Act, under which a specific vehicle in the yard’s possession can carry a lien for unpaid repair or storage charges — worth confirming has no open exposure before treating any vehicle on the lot as unencumbered inventory. Most provinces run an equivalent personal-property-security regime to Ontario’s, though Quebec’s framework differs, so confirm the applicable search in the province where the yard sits.

Get the insurer and auction relationships confirmed by the counterparty, not the seller

The single most common gap that surfaces at this stage is a supply relationship the seller described as solid that turns out to run through one specific claims contact or auction representative, with nothing in writing behind it. With the seller’s cooperation, contact the insurer or auction platform directly and get written confirmation that the arrangement is contractual and will continue under new ownership before relying on it as part of the business being bought.

Ask for a clearance certificate before closing an asset purchase

In Ontario, a Workplace Safety and Insurance Board clearance certificate confirms the seller has no outstanding workplace-insurance premiums, which matters because a purchaser of business assets can otherwise be exposed to the seller’s arrears. Other provinces run their own workers’ compensation boards with a similar clearance process — confirm the equivalent step for the province where the yard operates.

Verify the actual dismantling process against what the approval assumes

A compliance approval sets out the conditions a site is supposed to operate under; it does not confirm the site is actually operating that way today. Where possible, arrange a walkthrough of the fluid-draining and de-pollution process with the buyer’s own environmental consultant present, rather than relying on a document review alone, and compare what is observed against the conditions attached to the approval. A gap between the two — fluids being stored or handled differently than the approval specifies, for example — is a finding worth raising directly with the seller and, depending on its severity, either priced into the offer or made a condition of remediation before closing.

Spot-check the parts inventory against the system that is supposed to track it

A seller’s inventory management system is only useful to a buyer if what it says matches what is physically sitting on site. Pull a sample of listed parts or vehicles from the system and physically locate them in the yard, rather than accepting the reported inventory count at face value. A system that is genuinely current and accurate is a real asset that supports the price being asked; a system that turns out to be stale, or that cannot account for a meaningful share of what is actually on the lot, is a sign the inventory’s value has been overstated and should be discounted accordingly in any final negotiation.

Confirm the Record of Site Condition status directly, rather than assuming it from the property’s history

Where the transaction includes the underlying real property, find out early whether a Record of Site Condition has ever been filed for the site, and if not, whether this specific transaction will trigger a requirement to file one given the property’s history of industrial use. This is best confirmed directly with the seller’s lawyer and, where necessary, the Ministry of the Environment, Conservation and Parks, rather than assumed from how the property has been used in the past, because the requirement can be triggered by the transaction itself rather than by anything that has already happened on site. Outside Ontario, the equivalent confirmation runs through the applicable provincial environmental regulator instead.