Manufacturing businesses are integral to the economy, providing a wide range of products and services. However, selling a manufacturing business can be a daunting task considering the people, resources, assets, and expertise to run a successful manufacturing company in the US. Selling a manufacturing business requires an understanding of the current mergers and acquisition market conditions, knowledge of the industry and sub-sector, and excellent negotiation skills to ensure the client gets the best price and terms.
- What is a manufacturing business broker
- Why business owners should use this type of broker to sell their business
- The steps involved in the manufacturing business brokerage process
What is a Manufacturing Business Broker?
A manufacturing business broker is a professional who specializes in helping owners of manufacturing businesses sell their companies. They work to get the best possible value for their clients by developing marketing strategies, identifying, prospecting, screening, and qualifying potential buyers, as well as managing negotiations and due diligence. A manufacturing business broker is knowledgeable about the specific sector within the manufacturing industry, the current market conditions for mergers and acquisitions within the segment, and the legal and financial aspects of selling a business (e.g. inventory levels, working capital requirements, asset purchase sale agreement nuances, transition planning, etc.). They use their expertise to guide business owners through the complex process of selling a business, ensuring a successful transaction.
Why Use a Manufacturing Business Broker?
Selling a manufacturing business requires specialized knowledge and experience. Business owners may not have the time, resources, or expertise to handle the sale process effectively. A manufacturing business broker can provide the necessary guidance, allowing owners to focus on running their businesses while the broker manages the sale process. A dip in performance during the sale will impact the ultimate sales price!
One of the main reasons to use a manufacturing business broker is to get the highest optimum value for the business. This is the seller/business owner specific, balancing the sales price, working capital requirements, any loan terms, performance incentives, and equity rollovers, as well as taking care of current employees during the sale and transition. A broker has the experience and knowledge necessary to assess the value of a manufacturing business accurately. They can identify potential buyers willing to pay top dollar for the company. The chemistry fit between the buyer and seller is critical. The buyer may be a competitor, a high net-worth individual who wants to own their own business, a strategic buyer who wants a new product or capability, or a private equity firm. The business owner may prefer the type of buyer that makes the most sense and a business broker can help locate the best-fit buyer.
By creating a competitive bidding process, brokers can maximize the value of the business and ensure that the owner gets the best possible deal. A blind competitive bidding process yields wider choices for sales price and deal term structure for clients. In a blind bidding process, potential buyers are not aware of the identity of the other bidders, and no terms are proposed. This process ensures that each bidder submits their best possible offer without any influence from other bidders. The result is a fair market price that maximizes the value of the business. A manufacturing business broker will help the business owner evaluate the pros and cons of competing offers, for example, a lower offer price and all cash at close verse a higher offer price, but a seller’s note and longer transition timeline with the owner’s remaining in the business.
Negotiation skills are essential when selling a manufacturing business. A broker must be skilled in negotiating with potential buyers to arrive at the best value, structure, and terms for their clients. Creative negotiation skills are necessary to create a win-win transaction where both parties are satisfied with the outcome. Most business owners have created a legacy with the business they have built over the years and a broker can help navigate the trade-offs of the most compelling offer along with buyers who have a higher likelihood of maintaining business performance success. The chemistry fit between the buyer and seller is critical. The buyer may be a competitor, a high net worth individual who wants to own their own business, a strategic buyer who wants a new product or capability, or a private equity firm. The business owner may prefer the type of buyer that makes the most sense and a business broker can help locate the best fit buyer.
Manufacturing Business Brokerage Process
6 steps, each of which is critical to the successful sale of the business. The following are the steps involved in the process:
- Initial Consultation: During this stage, the broker meets with the business owner to discuss their goals and objectives for the sale, evaluate if there is a good fit to work together, and level set expectations on the timing of a potential sale.
- Valuation Assessment: The broker assesses the value of the business based on various factors such as revenue, profits, assets, and market trends. If the valuation comes in lower than expected, the owner may decide to hold on to the sale until company performance improves. If the valuation comes in within the owner’s expectation, the broker will take the business to market
- Go-To-Market / Find Buyers:: Once the valuation is complete, the broker develops a marketing strategy to attract potential buyers. This may involve advertising in industry publications, using online platforms, or contacting potential buyers directly.
- Negotiations: The broker manages negotiations between potential buyers and the business owner. They work to ensure that the owner gets the best possible value for the business while also considering the needs of the buyer. Once a Letter of Intent has been signed, the parties move to step five.
- Due Diligence: The buyer conducts a detailed examination of the business to ensure that it is a sound investment.
- Closing: The final step is closing the deal. The broker works with the buyer and the owner to finalize the terms of the sale and ensure that all legal and financial requirements are met. This may require additional legal and accounting resources outside of the owner’s normal legal counsel. It is critical that the business owner works with counsel who has transaction experience.
The sale of a manufacturing business can take several months or over a year to complete, depending on the complexity of the transaction and the quality of the business being sold. The following is an approximate timeline of the sales process:
- Initial Consultation: 1-2 weeks
- Valuation Assessment: 2-4 weeks
- Go-to-Market: 4-12 weeks
- Negotiations: 4-8 weeks
- Due Diligence: 4-8 weeks
- Closing: 2-4 weeks
In conclusion, selling a manufacturing business can be a complicated and time-consuming process. Engaging a manufacturing business broker can help business owners get the highest optimum value for their company. A broker has the expertise and experience necessary to guide business owners through the sales process, from valuation to closing. By using a blind competitive bidding process and creative negotiation skills, a broker can maximize the value of the business and ensure a successful transaction that meets the business owner’s exit goals. Business owners should consider engaging a certified business intermediary with manufacturing brokerage experience to help them sell their companies successfully.
Are you ready to unlock the potential of manufacturing business brokerage?