Product Liability and IP Risks in Agri-Food SME Acquisitions
Managing product liability and Intellectual property (IP) risks is critical during agri-food small and medium-sized enterprises (SMEs) acquisitions. Whether scaling operations, entering new markets, or engaging in mergers and acquisitions, SMEs must balance stringent food safety regulations with the strategic protection of their innovations. Oversight in compliance or IP management can lead to costly recalls, legal disputes, or lost competitive advantage, ultimately threatening both profitability and reputation. This article explores the dual challenges of managing product liability and IP risk during regulatory due diligence, and offer actionable insights for SMEs in the agri-food sector.
Mitigating Product Liability Risks in Agri-Food Transactions
Product liability is a pressing concern that can threaten business viability. Safety failures, or regulatory non-compliance can be costly. Due diligence must involve reviewing food safety compliance with relevant regulations such as the EU General Food Law (Regulation (EC) No 178/2002) and associated legislative frameworks, HACCP standards, and local market requirements. A cautionary example is the 2017 fipronil egg contamination scandal, which severely impacted numerous European SMEs in the poultry sector. Businesses that failed to conduct supplier audits and ingredient traceability checks suffered financial losses and bans from major retailers. Ensuring strong supplier agreements and rigorous internal quality controls can help SMEs mitigate such risks.
Intellectual Property as a Growth Lever
IP is often overlooked by SMEs, including those in the agri-food sector, despite being essential for securing market positioning and competitive advantage. For example, a recent study revealed that up to 79% of UK SMEs did not fully protect their IP assets. Protecting trademarks, patents, and trade secrets can enhance brand value and prevent costly disputes. When UK-based organic food brand Pukka Herbs was acquired by Unilever, the company’s well-established brand name and proprietary herbal ingredients tea blend were key drivers of the deal. SMEs must ensure that their IP rights are properly registered and protected before entering negotiations with investors or larger food businesses. Additionally, licensing agreements and trade secret protections should be reviewed to prevent unauthorised use of proprietary recipes, production methods, or branding assets.
The Intersection of Product Liability and IP
The interplay between product liability and intellectual property is particularly significant for SMEs developing novel food products, such as plant-based alternatives, functional foods, and organic brands. A misstep in regulatory compliance or failure to defend a unique formulation could result in both legal and financial repercussions. For example, Danish plant-based food startup Naturli’ faced regulatory scrutiny when expanding its dairy-alternative products into new European markets, requiring swift adaptation to labelling and ingredient declaration laws. Ensuring that both IP assets and product safety measures align with regional regulations is crucial for businesses seeking to scale successfully.
Best Practices for Due Diligence in SME Transactions
SME agri-food businesses must approach due diligence with a structured yet pragmatic strategy. Engaging regulatory consultants, IP specialists, and food safety auditors can provide invaluable insights when entering acquisition talks or partnership deals. It is key to conduct extensive reviews of brand trademarks, compliance certifications, and potential liability exposures linked to target’s supply chain. SMEs should also leverage digital traceability systems and third-party audits to strengthen transparency and compliance, reducing the risk of unforeseen liabilities during acquisitions.
Strategic Advantage of a Proactive Approach
A proactive approach to product liability and IP due diligence is not just a defensive measure. Rather, it is a strategic tool for growth and investment readiness. Anticipating legal and regulatory risks enable businesses to position themselves as attractive partners for acquisitions or scaling opportunities. SMEs that demonstrate strong compliance and IP protection and ensuring their products align with both safety regulations and brand integrity will successfully attract investor interest.
How We Can Help
At Braintree Innovation & Research Advisory, we support agri-food SMEs through every stage of regulatory due diligence during acquisitions, partnerships, or market expansion. Combining our regulatory expertise with the legal insight of partner law firms, we provide tailored guidance on regulatory compliance, product liability risk assessments, and intellectual property protection. We enable you to manage risk, unlock value and strengthen your appeal to investors and partners.
