Skip page header and navigation

Regulatory approvals imminent for Alternative Proteins – the five steps you need to take to attract investment or prepare for sale

Regulatory approvals imminent for Alternative Proteins – the five steps you need to take to attract investment or prepare for sale

In 2019 the UN’s intergovernmental Panel on Climate Change estimated that the global food system was responsible for 21-37% of greenhouse gas emissions.  Animal agriculture is a significant contributor.

With the global population predicted to hit nearly 10 billion by 2050, research is being undertaken to create more sustainable ways for producing meat, seafood, dairy and eggs. These include plant-based protein alternatives (which are already readily available), cultivating the products directly from cells or producing them by fermentation.  

According to Barclays the market for meat alternatives globally could be worth $140 billion within the next decade or about 10% of the $1.4 trillion global meat industry. The Good Food Institute forecasts investment in companies creating sustainable alternatives to conventional animal-based foods hit $3.1bn in 2020, with a year-on-year growth of 300%. 

The Dutch government has pledged to invest €60million in cellular agriculture and in Singapore one company has already been approved to sell cultivated meat.

Recent investments by governments in cellular agriculture and an imminent wave of regulatory approvals has given alternative protein businesses greater confidence that they can access the necessary growth capital and benefit from the opportunity.  

Here we consider action to take now in order to prepare alternative protein businesses for investment or sale.

1. Preparation

Prepare for due diligence as early as possible. Compiling and preparing the documents required for the due diligence exercise can be a time-consuming process and should be commenced before the proposed transaction, ideally with the assistance of professional advisers. The company’s accountants can advise on financial aspects and its lawyers can help with legal aspects.  

2. Regulation 

The legal due diligence process can be particularly complex in respect of food related businesses.  Regulation for alternative protein products is constantly evolving and there are also different labelling laws for different jurisdictions to be considered. In France, the use of meat-based terminology such as ‘steak’ and ‘burger’ has been banned for plant-based foods. As well as providing the proposed buyer/investor with copies of contracts with key customers, manufacturers and suppliers, leasing agreements, banking documents, employment contracts etc, the important regulatory aspects of the business must not be ignored. The business will need to demonstrate that it meets certain standards or has obtained certain certifications in connection with manufacturing, production or distribution of food products.

3. Protection

It is important to ensure the business has taken appropriate steps to protect valuable intellectual property rights before commencing the investment/sale process. There is a higher barrier to entry for cellular agriculture as opposed to plant-based alternatives. A buyer/investor will usually expect the sellers to demonstrate that the company has ownership of any key intellectual property rights and that the company’s intellectual property records with relevant registries are kept up to date and are not at risk.

4. Timing

The sellers should review the company’s key contracts to see if there will be any impacts on timing for the sale or investment process. For example, whether there are any shareholder approvals or consents required under the company’s articles of association or any shareholders’ agreement, partnership agreement or joint venture agreement. In addition, whether any key contracts require consent to change of control of the business. The sellers should work with their advisers early on to identify any timing issues or consents that may need to be factored into the transaction timetable.

5. Records

Before commencing the sale process, it is imperative that the corporate records of the company are in good order and up to date. The records, such as the statutory books for the company, will need to be written up correctly and must provide complete and accurate information.  In addition, the company’s filings at Companies House (or the relevant public registry) must be up to date and accurate. The sellers will also be required to hand over certain original documents, such as share certificates (as evidence of their title to the shares), to the extent such documents have not been lost. It would be advisable to ensure that such documents are capable of being collated early on.

We are a leading law firm in acting for businesses in the alternative protein sector. Further details of our life sciences practices and the wide range of services we provide to businesses in the sector can be found by following the link set out below.