Expanding existing operations through the acquisition of a distribution center is a significant strategic move for any business looking to enhance its logistics and distribution capabilities. This process involves a series of complex legal, financial and operational considerations.
The legal concerns involved in the acquisition of a distribution center are numerous. An understanding of relevant zoning laws, environmental regulations and property law is just the beginning. To make matters more complicated, each distribution center is subject to its own set of nuanced legal concerns, based on its location, size and the nature of the operations to be conducted.
For example, a recent $65 million distribution center acquisition in Pennsylvania is not subject to the exact same concerns as a $45 million acquisition in Ohio, and not just because state and local laws differ. The environmental and zoning concerns of any center vary from location to location.
Conducting due diligence
Due diligence involves conducting a broad, yet nuanced review of the physical property, legal compliances, financial assessments and operational capabilities of any particular distribution center that a company is interested in acquiring. This is a very important part of the acquisition process:
- Physically, the property in question should be inspected for structural integrity and suitability for the intended logistics operations.
- Legally, it is essential to ensure that there are no unresolved land title issues, liens or encumbrances that could affect the acquisition.
- Financially, reviewing the past performance and projected costs associated with the property will help in assessing its economic viability.
- Operationally, evaluating existing logistics networks, technology integration, and capacity for expansion are all crucial for determining how well the center can support your business objectives.
Once the legal and financial aspects are settled, planning for the integration of the new distribution center into existing operations becomes the focus of the broader process. This undertaking may involve logistical planning to incorporate new supply chain routes, technology integration for inventory and shipping management and staffing considerations. Strategic planning can help those invested to maximize the efficiency and productivity of the new center from day one.
Acquiring a distribution center to expand operations is a complex process that requires careful planning, both legally and strategically. To maximize both the efficiency and effectiveness of this process, seeking personalized feedback from a real estate attorney as early as possible is ideal.