With the number of biodiesel plants changing hands and being auctioned off, it&rsquo;s important to consider that when you buy a plant, you may not necessarily be buying the license to use the technologies in that plant.
Dean Edstrom, partner attorney with Lindquist &amp; Vennum, tells me that, as a very important part of their due diligence, potential buyers need to scrutinize the terms of the technology license and determine first if it is transferable or not. &ldquo;It may not be transferrable on the sale of the assets,&rdquo; Edstrom says. There are ways to get around this, he says, if the seller and the buyer can agree. For instance, a merger between the selling entity and the buyer, or a subsidiary of the buyer, may allow continued use of the technology license since there technically isn&rsquo;t any &ldquo;transfer&rdquo; of ownership or use rights. However, if the license is drafted tightly, Edstrom says it could terminate on merger and/or bankruptcy.
There&rsquo;s also the possibility of a reverse merger, which intuitively may not make sense but by some magic of the law, as Edstrom says, it works. He says the REG Blackhawk Biofuels deal was completed through a reverse merger. If the buyer is really in a jam though, they can try to renegotiate with the technology licensor.
John Eustermann, partner attorney with Stoel Rives, tells me there&rsquo;s a lot involved here: signability provisions; contractual assets for technology and feedstock agreements; the language of licensing regarding upgrades and modifications; and much more. &ldquo;If you&rsquo;re buying assets, what representations are the sellers making, and what warranties are there?&rdquo; he says. He likens it to buying a car&mdash;are you getting a warranty with it, or is the sale as is?
Some technology licenses have clauses that state if any modifications or upgrades are made, the licensor now owns the rights to the modified process technology. So, the lesson is, if you&rsquo;re buying a plant and plan to upgrade to multifeedstock processing, for instance, do your due diligence.
Eustermann says get the lay of the land on how to evaluate the deal, maybe get a letter of intent signed, or a nondisclosure agreement from the potential buyer so, if the sale is not public, no undue hardship is caused if others find out. He also says to maybe get a no-shop provision. But, he points out, there&rsquo;s a cost to that. &ldquo;Don&rsquo;t just walk around the plant and say, &lsquo;Okay, it&rsquo;s running, let&rsquo;s go!&rsquo; Look at the contractual assets and make sure there are no risks, or if there are risks, you know how to deal with them.&rdquo;&nbsp;
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There are important issues to consider when purchasing biodiesel assets, such as - are you licensed to use the process technology? 

So you bought a biodiesel plant...do you have license to use it?

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Upcoming Events

North American SAF Conference & Expo

2026 International Biomass Conference & Expo

So you bought a biodiesel plant...do you have license to use it?