Brewery or brewpub due diligence

Due diligence on a brewery or brewpub has one job a generic small-business checklist does not: confirming, with documentary proof, that the buyer will actually be permitted to keep making and selling the product, and that the retail relationships justifying the price will still be there once ownership changes. A buyer who treats this as a standard small-business diligence process with a few extra alcohol-specific questions bolted on is missing the point — in this sub-sector, the licensing file and the account list sit above the financial statements in importance, because a brewery with clean books and no approved licence transfer is not a functioning acquisition at all.

The federal and provincial licence files

Request the current federal brewer’s licence, any correspondence with the Canada Revenue Agency about compliance or renewal, and written confirmation of what the buyer’s own application will require and how long it is expected to take. Do the same for the provincial manufacturer’s licence and any taproom sales endorsement — Ontario’s AGCO, or the equivalent authority in every other province — and ask directly whether the regulator has ever declined a transfer in comparable circumstances, since the answer says a great deal about how much risk sits in this one document.

Retail listings and distribution agreements

Review every material retail listing and distribution agreement individually for whether it requires the counterparty’s consent to continue after a change of ownership, and whether that consent has actually been sought rather than assumed. A single dominant listing that turns out to be silent on assignment, with no indication the retailer or distributor has been approached, is one of the more common findings that stalls a brewery acquisition close to the finish line.

Inventory and equipment condition

Kegs and packaged stock should be counted and inspected directly rather than taken from the seller’s book value, since aging inventory carries a genuine shelf-life problem the buyer inherits along with the brand. Brewhouse and packaging equipment should be reviewed for age, remaining useful life and any deferred maintenance, with a capital estimate built into the offer for whatever refresh is realistically due within the next few years rather than treated as a surprise for later.

Environmental and wastewater compliance

Brewing produces spent grain and process wastewater in volumes an ordinary food or beverage retailer never has to manage, and both are regulated activities rather than a housekeeping detail. Request the brewery’s environmental compliance approval or trade-effluent discharge approval — Ontario runs this through its Environmental Compliance Approval process, with every other province running its own equivalent permitting regime — along with whatever spent-grain disposal or recycling arrangement is currently in place, and confirm neither has an open compliance issue that would follow the business to its new owner.

Search the personal property registry for equipment liens

Brewhouse tanks and packaging lines are exactly the kind of asset a previous lender may have registered a security interest against, and that registration does not disappear simply because the seller says the equipment loan is paid off. A personal property registry search in the province where the brewery operates, run against both the corporation and the specific equipment being acquired, confirms whether any registered interest still needs to be discharged before closing — a gap that is straightforward to fix when found early and a real closing obstacle when it surfaces at the last minute.

Recipe and brand ownership

Confirm that recipes, trademarks and brand assets are formally owned by the corporation being sold rather than held personally by the head brewer or founder, and that any trademark registration is current and assignable. A brand that is legally the seller’s personal property, even where everyone has always treated it as the business’s, is a gap that needs to be closed before closing, not after.

Findings that commonly stop a deal

• The relevant regulator indicates it will not approve the licence transfer as proposed, or will only approve it with conditions the buyer cannot meet — this ends the deal as structured, not just delays it
• A dominant retail listing or distribution agreement requires consent to assign and the counterparty signals it will not provide it, removing a material share of the revenue the price was based on
• Recipes or brand assets turn out to be owned personally rather than by the corporation, with no assignment in place
• Inventory on physical count is materially older or larger than represented, exposing a shelf-life write-off the buyer did not price in

The employment and corporate layers underneath

Beyond the brewery-specific file, standard diligence still applies: confirm the corporation’s good standing, check for outstanding CRA debts or registered security interests against the business, and review employment arrangements for brewhouse and taproom staff, including whether any role is covered by a collective agreement. None of this is optional simply because the licensing and retail-listing questions feel more urgent — a clean corporate and employment file is still what makes the rest of the deal executable.