Potato Operation Due Diligence

Once you’re under an LOI on a potato operation, diligence has to verify two things a generic checklist won’t catch on its own: whether the processor relationship actually survives the sale, and whether the land itself is something you’re eligible to hold.

Get the processor’s consent in writing, not in principle

A verbal assurance that the processor should be fine with the change of ownership is not consent. Get the actual written confirmation, understand any conditions attached to it, such as volume, quality or delivery terms, and treat a processor who won’t commit in writing before closing as a serious risk to the deal’s core value.

Reconcile settlement history against the contract’s stated terms

Verify several years of actual processor settlement statements against what the contract itself says the pricing formula and acreage commitment should produce, because a contract that reads as favourable on paper only matters if the operation has actually been paid that way in practice. A pattern of quality deductions, grade-out penalties or shortfall payments that don’t show up in a simple summary of contract terms changes the real economics of what’s being bought, sometimes substantially, and it’s a check a buyer relying on the seller’s own description of the contract would otherwise miss entirely. Where the shortfall traces to quality grading rather than volume, it’s also worth asking whether that reflects a field-level issue the buyer could fix, or a structural mismatch between what the land produces and what the contract actually rewards.

Verify storage and handling capacity against the contract

Measure actual, usable climate-controlled storage capacity and handling throughput against the acreage the contract commits to deliver, not against the operation’s historical acreage. A shortfall here caps how much of the represented contract value the buyer can actually realize, regardless of how strong the contract terms look on paper.

Get an independent mechanical assessment of the equipment

Commission an inspection of climate-control systems, ventilation, handling lines and specialized planting and harvest equipment rather than relying on the seller’s maintenance log alone, since a log shows what was recorded, not necessarily what was actually done. Confirm the equipment lien search covers financed storage and handling systems separately from vehicles and rolling stock, because a lender or equipment-finance company can hold security over a storage system that isn’t obvious from a general title search, and an undisclosed lien on the storage building’s own systems is a different problem than one on a tractor. It’s worth asking, too, how the equipment’s remaining useful life lines up with the acreage the contract commits the operation to deliver, since undersized or ageing handling capacity can quietly cap how much of that commitment the buyer can actually meet. Where equipment is leased rather than owned outright, confirm whether the lease is assignable to a new owner or terminates on a change of control, since replacing a leased handling line on short notice is a cost most buyers haven’t budgeted for.

Test the rotation land, not just the current crop

Review multiple years of field-by-field rotation records and, where warranted, commission soil testing for disease pressure — wireworm, scab, late-blight risk. A rotation history that has been stretched thin to meet contract volume can look fine in this year’s yield and still be a real problem for next year’s, so the current crop alone tells an incomplete story.

Confirm certification and land-ownership status

• Verify whether seed-potato certification, if claimed, is current, and what it takes for the buyer to requalify their own fields and stock.
• Confirm the land title is clear and search for equipment liens.
• In Prince Edward Island, New Brunswick or Manitoba, confirm exactly what provincial approval the buyer needs before closing and how long it realistically takes.

Confirm insurance and any environmental exposure on the storage site

Bulk potato storage typically runs on fuel-fired heating and humidity systems, and some operations maintain on-site cull or waste-handling areas, so confirm current property, business-interruption and environmental liability coverage rather than assuming a standard policy covers it. Ask directly whether the storage site has any history of fuel spills, refrigerant leaks or contamination that a routine title search wouldn’t surface. This is a narrower category of finding than the processor contract or the rotation land, but it’s specific to how a potato storage facility is actually built and run, and it’s exactly the kind of thing a generic small-business diligence checklist has no reason to ask about. Where waste or cull material has historically been managed on-site rather than hauled off, it’s also worth asking whether any provincial environmental reporting obligations attach to that practice, since a buyer inherits that history along with the land.

What a finding actually means

A storage shortfall or ageing equipment is usually a priceable finding that gets negotiated into the deal. A processor who won’t confirm continuation, a rotation history that reveals entrenched disease pressure, or a provincial land-ownership approval that gets denied are the findings that actually kill this kind of deal, and knowing the difference before deciding how hard to push is the whole point of doing diligence properly.