Nursery and sod operation due diligence

Under an LOI on a nursery or sod operation, diligence shifts from evaluating an opportunity to verifying details a buyer can’t simply take on the seller’s word. Three of the four biggest risks here — inventory accuracy, water-licence capacity and quarantine-zone status — are facts that can be checked directly against a physical count, a permit document and a federal regulated-area map, rather than judgment calls, which makes this one of the more verifiable diligence lists in small-business M&A once a buyer knows exactly what to check and where to check it.

Physically verify the inventory, don’t just review the record

The seller’s inventory record states an age and variety count; diligence means walking the property, or having a qualified nursery professional walk it, and confirming that record matches what’s actually growing. Discrepancies between the stated and actual inventory — in volume, variety or condition — are common enough to check for specifically, and they directly affect what the business is worth, not just a technical detail to note and move past on the way to a bigger issue. A count that was accurate a season ago may no longer reflect losses from weather, pests or unsold stock aging out of the market.

Read the water licence, not a summary of it

Get the actual permit document and confirm the permitted volume, any seasonal restrictions, and how it compares to current and planned water draw. Then confirm separately, with the relevant provincial authority, whether the licence transfers with the sale automatically or requires its own approval process — this is not a step to take on the seller’s assurance, since approval is not guaranteed and a denied or reduced transfer changes what the buyer is actually acquiring, sometimes significantly enough to revisit the purchase price.

Check quarantine-zone status directly against current CFIA data

Don’t rely on the seller’s understanding of whether the property sits inside a regulated pest-quarantine area — check current CFIA regulated-area information directly, because designations are reviewed and can change, and a property can be partially inside a zone in a way that isn’t obvious from a general description. If the property is affected, confirm exactly what shipping restrictions apply and to which portion of the inventory, since a partial restriction is a very different finding from one covering the whole operation.

Assess how real the customer relationships actually are

Ask for whatever documentation exists on landscape-contractor and garden-centre relationships, and where none exists beyond informal repeat business, treat that explicitly as a risk factor rather than assuming goodwill transfers automatically. A conversation with the largest few customers, once the deal is far enough along to support it, tells a buyer more about how durable those relationships actually are than any written description the seller can provide.

Confirm any voluntary certification and what maintaining it requires

Where the operation holds a voluntary nursery-certification credential tied to a landscape-industry association program, get the certification documentation directly and confirm whether it’s held by the business or by the seller personally, since a personal certification doesn’t necessarily carry over to a new owner. If any garden-centre chain or contractor customer relationship depends on that certification being maintained, treat a lapse or a non-transferable certification as a real risk to that specific relationship, not just an administrative detail to sort out after closing.

Get an independent look at plant health, not just the inventory count

The inventory count confirms how much stock exists and roughly what condition it’s in, but a separate walk-through by a qualified nursery professional or plant-health inspector, looking specifically for disease, pest pressure or root problems, catches issues a straightforward count won’t. Stock that looks healthy and counts correctly on paper can still be carrying a problem that reduces its saleable value or, in a worse case, puts the property at risk of a future quarantine designation — this is worth doing as its own step rather than assuming the inventory count already covers it. For field-grown material especially, ask the inspector to check root health directly rather than relying on how the top growth looks, since a root problem is often the last thing to show above ground and the first thing a buyer’s own post-purchase inspection will find.

Registry and corporate searches

Standard diligence still applies alongside the sub-sector-specific items: confirm the selling corporation’s good standing, check for registered security interests against the equipment and any owned land, run an execution search for outstanding judgments, and confirm who actually controls the corporation through the federal individuals-with-significant-control register where the ownership structure isn’t obvious from the share register alone.

What a finding actually means

A water licence capped below what the buyer plans to use doesn’t necessarily kill the deal, but it should change the price or the buyer’s expansion plans. A confirmed quarantine designation doesn’t necessarily kill it either, but it changes which markets the stock can reach and should be modelled into the buyer’s revenue expectations before closing, not discovered afterward when the shipping restriction shows up as a lost sale.