Private-label brand due diligence

By the time a buyer is under LOI on a private-label brand, the commercial terms are largely settled and the job shifts to verification: confirming that what the seller described actually exists, in writing, and actually transfers. Four categories of documents do almost all of the work here, and they rarely get equal attention from a buyer used to diligence on a more conventional business. A financial-statement review and a lease check, if there is one, matter far less than whether the factory will put its name to continuing the relationship, whether the tooling on the factory floor is legally the brand’s, whether the product’s compliance paperwork is actually in the seller’s name, and whether the inventory the purchase price assumes is where everyone thinks it is. A buyer who runs a generic due-diligence checklist here, weighted the way it would be for a retail or service business, can clear a private-label deal that a specialist working through these four areas specifically would not.

The manufacturing agreement itself

Read the agreement for three things specifically: whether it contains a real exclusivity or non-compete clause and not just an informal understanding, whether it requires the factory’s consent to assign the agreement to a new owner, and what happens if that consent is withheld or delayed. An agreement that goes quiet on assignment effectively hands the factory a veto over the sale that neither party priced in. Also check whether pricing or minimum-volume commitments in the agreement are written as personal to the individuals named in the contract rather than to the corporate entity, since a factory can sometimes treat those commitments as ending when the named owner does. Where there is no written agreement at all — common enough in this sub-sector that it should not be treated as disqualifying on its own — get the factory to confirm the commercial terms and its willingness to continue directly, in writing, before closing rather than relying on the seller’s account of the relationship.

Tooling and mould ownership

Confirm who legally owns any custom tooling, moulds or packaging dies the brand paid for, separately from confirming that they exist and are in usable condition. Factories routinely retain tooling on their own books as a matter of course, even when the brand funded it entirely, unless the original commissioning paperwork says otherwise. Where possible, arrange a factory visit or request dated photographs confirming the tooling actually exists, is production-ready, and is not shared across another brand’s runs — paperwork alone does not confirm any of that. If ownership sits with the factory, get a specific, written buy-back or transfer right rather than accepting a verbal assurance that it “won’t be a problem” — that assurance is worth nothing once the deal has closed and the leverage has shifted.

Product compliance and licensing records

Where the product falls under Health Canada or CFIA licensing — natural health products, cosmetics, food — confirm the licence is current, confirm whose name it is actually held in, and confirm what re-notification the change of ownership triggers before assuming the paperwork simply carries over. Ask specifically whether the product has ever been subject to a recall or a compliance inquiry from either regulator, and if so, confirm it was fully closed out rather than left open against the current licence holder. A CIPO trademark register search independently verifies what the seller’s registration certificate claims, including whether it actually covers the categories and geography the brand operates in rather than a narrower filing made years earlier. Packaging and labelling claims should be checked against federal labelling requirements directly rather than taken on the seller’s word, since any misrepresentation exposure transfers with the product regardless of who wrote the original copy.

In-transit inventory and import documentation

Private-label inventory is frequently on the water or in the air at the moment a deal closes, and that stock needs an explicit cutoff — a date and a method for determining what belongs to the seller’s side of the ledger and what belongs to the buyer’s, plus clarity on who will be the importer of record for shipments landing after closing. Confirm this can actually be arranged with the customs broker and freight forwarder before closing, not after, since import documentation tied to the seller’s existing importer status does not automatically transfer to a buyer’s own account. Confirm cargo insurance coverage through the cutoff date too — a loss in transit with no clearly insured party becomes a dispute neither side budgeted time or money for.

What a finding actually means

A factory that declines to confirm it will continue manufacturing for the buyer, or that will only do so on materially worse terms, is not a negotiating position to work around — it is the product’s actual supply risk revealing itself before closing rather than after. Tooling confirmed to be factory-owned with no transfer right means the buyer is effectively purchasing a design and will need to re-tool from scratch if the relationship ever ends. A required product licence that turns out to be in the seller’s name with no transfer path, or in-transit inventory that cannot be cleanly allocated, both point to the same underlying problem: something the purchase price assumed transfers automatically does not. Taken individually, each finding can look like a manageable negotiating point; taken together, they tell a buyer how much of the business actually depends on relationships and paperwork sitting outside their control.