For manufacturers, growth often means acquisition
For many manufacturers, growth is about more than increasing production, winning new customers or entering new markets. There can often come a point where acquiring another business can be the most effective way to accelerate expansion. Acquisition is a very effective way to bring in new capabilities, technology, people, customers and premises or simply open up new markets.
However, acquisitions also introduce significant legal and commercial complexity. For manufacturers considering acquisition as part of their growth strategy, getting the right legal support is essential. A lawyer with extensive manufacturing experience will identify potential risks, protect value and make sure the transaction delivers what the business demands.
Why and when do manufacturers acquire other businesses?
Manufacturers may consider an acquisition for a variety of reasons. It can provide a faster route into a new geographical market, add complementary products or services, increase production capacity or bring specialist expertise and technology in-house.
Acquisition can also support manufacturers’ growth when organic expansion would take too long. Buying an established business can provide an existing customer base, workforce, supply chain and operational infrastructure.
For some manufacturers, acquisition is driven by consolidation within their sector. For others, it may be about securing strategic assets, strengthening their supply chain or addressing succession issues where a successful manufacturing business needs a new owner.
Whatever the motivation, every acquisition needs very careful planning.
The legal, employment and property implications can all have a direct impact on the value and viability of the deal.
Protecting the deal
Corporate and commercial lawyers play a central role throughout an acquisition. Their work typically begins with helping the buyer understand the structure and terms of the proposed transaction and continues through due diligence, negotiation and completion.
For a manufacturing business, due diligence can cover everything from corporate structure and customer and supplier contracts to intellectual property, regulatory compliance, financing arrangements and ongoing commercial commitments.
The legal team will also help identify issues that could affect valuation or create liabilities after completion. This may include restrictive contractual provisions, change-of-control clauses, intellectual property ownership or disputes.
Once the risks are understood, corporate lawyers can advise on the appropriate transaction structure and negotiate the acquisition agreement and associated documentation. Commercial lawyers also review key trading arrangements, helping ensure the acquired business's important customer, supplier and distribution relationships can continue after the transaction.
Banking lawyers will also have an important role should the acquisition involve external finance or existing banking arrangements.
A banking specialist will advise on acquisition funding, review and negotiate facility agreements and related security, helping to ensure that the financing arrangements work alongside the wider transaction. This may include dealing with lender conditions, guarantees, debentures and other security requirements, as well as consents or releases needed in connection with the acquisition.
For manufacturers, having corporate and banking specialists working closely together is important. It helps ensure funding is available when required and that the acquisition does not restrict the business's future operations during the transaction.
Ultimately, for manufacturers focused on growth, the objective will not simply be to complete the acquisition. The ultimate objective will be to make sure the deal provides a solid platform for future growth.
When it comes to a manufacturers’ growth, people + consistency = productivity
People are often one of the most valuable assets acquired in a manufacturing transaction. It is, therefore, one of the areas requiring the greatest care.
Employment lawyers can advise on the employment aspects of the acquisition. This might include the application of the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), employee consultation requirements and the transfer of employment contracts depending on the structure of the transaction.
They can also help identify potential employment liabilities during due diligence. These liabilities may include historic disputes, contractual issues, bonus arrangements, holiday pay concerns, pension obligations or other employment-related risks.
For manufacturers, there may be additional practical considerations around shift patterns, collective arrangements, pay structures, site-based employees and specialist technical personnel.
Post-acquisition integration can be equally important. Employment lawyers can support the business as it brings teams together, helping address differences in contracts, policies and working practices while minimising disruption.
Securing the physical foundations
Manufacturing acquisitions frequently involve significant property considerations. Factories, warehouses, offices and development sites can all be fundamental to the value of the acquired business.
Commercial property lawyers can investigate the ownership or lease arrangements for relevant premises, identifying issues that could affect the transaction or the future operation of the site. This can include reviewing title documents, rights of access, restrictions, planning matters and property-related liabilities. Environmental considerations can also be particularly important for manufacturing premises.
Where premises are leased, lawyers may need to consider landlord consents, assignment provisions, rent reviews and lease terms. Where property is owned, title and associated rights need to be examined carefully.
Property lawyers can also support manufacturers with the acquisition, disposal or restructuring of a property portfolio as part of the wider transaction to ensure the property strategy remains aligned with the business's growth plans.
One team; the joined-up approach to securing manufacturers' growth
An acquisition rarely fits neatly into separate legal boxes. Corporate, banking, employment and property issues are interconnected, and a problem in one area can have consequences elsewhere.
This is why manufacturers considering acquisition should look for a legal team that can provide all four areas of expertise and, crucially, deliver them seamlessly as one genuinely integrated team.
When corporate, banking, employment and commercial property lawyers work closely together, issues can be identified and resolved more efficiently. Advice is coordinated, rather than the client having to manage separate advisers, any of whom who may not have the full picture.
For manufacturers, that joined-up approach can be particularly valuable because the legal advice needs to reflect how the business actually operates whether that be with regards to its people, premises, customers, suppliers, production capabilities and long-term commercial objectives.
And experience matters.
Wake Smith has 225 years manufacturing industry experience. Our current manufacturing team haven’t been with us for all this time but they do bring a depth of sector understanding that goes beyond knowing the law. Manufacturing is their bread and butter which means they understand the commercial realities facing manufacturers and the nuances that make manufacturing very much its own world. Most importantly, they know exactly how to deal with the specific issues that so often arise when a business is expanding through acquisition.
For manufacturers, growth through acquisition is highly attractive because it can quickly open the door to significant opportunities. With the right legal team alongside you – a team that offers the crucial combination of corporate and commercial, employment and commercial property expertise coupled with extensive manufacturing experience and delivered as one seamless service - your businesses can approach its next acquisition with greater clarity and total confidence.
Contact Wake Smith today here or on 0114 266 6660, or you can find out more about our specialist manufacturing team here.
