Due diligence on a packaging manufacturer

Once a packaging manufacturer is under a letter of intent, diligence is where a buyer finds out whether the business behind the listing matches the one actually being sold. Beyond the standard review of financial statements, three checks carry more weight than usual in this sub-sector: whether the environmental and compliance picture holds up against records the seller does not control, whether the customer supply agreements actually say what the seller has described, and whether the systems and tooling behind the product are genuinely what the business claims to own. Each has a specific way to verify it, and each finding means something different for how the buyer should proceed from there.

Verify environmental approval and site history against government records

Where the plant runs solvent-based printing or laminating operations, confirm the provincial air-emissions approval status directly — in Ontario, this means checking Environmental Compliance Approval status and any record of site condition, rather than relying on a seller’s assurance that everything is current and in good standing. Other provinces run their own environmental permitting regimes, so confirm the equivalent locally instead of assuming Ontario’s framework applies elsewhere, since carrying over the wrong province’s assumptions is a common and avoidable diligence gap. Where the plant has operated at the same site for many years, a Phase I environmental site assessment is worth commissioning independently even if the seller has not flagged any concern.

Read the supply agreements for what they actually say, not what they are said to say

Pull each material customer agreement and check specifically for change-of-control notice or consent clauses, renewal terms, and whether input-cost pass-through language actually exists in the text or has only ever been discussed informally between the parties. A seller who describes agreements as assignable without producing the language that says so has given a buyer half the picture, and the gap between the two is exactly where post-closing disputes with an existing customer originate. Where an agreement is silent on assignment, confirm directly with the customer, in a manner consistent with the confidentiality terms of the deal, rather than assuming silence means consent.

Confirm food-contact compliance and tooling ownership with documentation, not description

For any packaging supplied into food or beverage customers, request the underlying Health Canada food-contact material compliance records rather than accepting a summary assurance that everything is in order. Separately, confirm in writing whether the print plates, dies and tooling currently in production are company-owned or customer-owned — a business presented as owning tooling it does not actually hold is a materially different, and materially smaller, acquisition than the one described in the listing.

Check for product liability exposure tied to what the plant has shipped

A manufacturer that has shipped packaging into food, pharmaceutical or consumer-product supply chains carries product liability exposure for defects in material already in the market, and this exposure does not disappear simply because ownership changes hands. Reviewing past claims history and confirming how liability is allocated in the purchase agreement is a standard part of diligence here, not an unusual precaution reserved for higher-risk sectors — and where a claim has occurred previously, understanding exactly what corrective action was taken tells a buyer more than the claim itself.

Reconcile equipment records against what a technical walkthrough actually shows

A fixed asset schedule listing converting and printing equipment is a starting point, not a conclusion — a technical walkthrough, ideally by someone independent of the seller, should confirm which presses are actually in productive use, which are held for parts or backup, and which appear on paper but no longer run economically. Reconciling this against the maintenance records and against what the seller has represented about capacity is one of the more reliable ways to catch a gap between the business as described and the business as it actually operates. Where a press has been idle for an extended period, ask directly why — an honest answer about softening demand in one product line is very different from a press that has been quietly failing.

Verify beneficial ownership and confirm no undisclosed liens sit against key assets

Confirming who actually controls the corporate entity being purchased, and checking for registered security interests against the converting equipment or tooling being acquired, is a routine but essential step that protects a buyer from inheriting a dispute it did not know existed. This is a mechanical search, not a judgment call, and skipping it to save time is a false economy given how cheaply it can be done relative to the cost of finding a lien after closing.

Know what a finding actually means before reacting to it

A top customer confirming that a formal re-tender will follow a change of ownership is primarily a pricing and timeline problem to manage through the purchase agreement, not automatically a reason to walk away from the deal. An environmental approval found genuinely lapsed, or a documented history of unresolved compliance issues, is more serious, since either can halt production or trigger regulatory action with little notice. Sorting findings by what they actually threaten — commercial, financial or legal — is what makes diligence useful rather than merely thorough for its own sake.