10 Important Questions Manufacturers Should Ask an M&A Advisor

10 Key Questions Manufacturers Should Ask an M&A Advisor - Accelerated MFG Brokers
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Selling a manufacturing business for most will be the largest transaction of their lives and impact their retirement lifestyle.  Therefore, choosing the right M&A Advisor or business broker to represent them is critical. Because most small manufacturing business owners have not been exposed to the M&A world, they sometimes don’t know where to start. In this article, we’ll be exploring the 10 Most Important Questions Manufacturers Should Ask Before Choosing an M&A Advisor to Sell Their Business. Check it out:

  1. Do I have to pay upfront fees to sell my business?
  2. How important is it to pick a specialist over a generalist?
  3. How will the M&A advisor establish the appropriate price for my business?
  4. How will the M&A Advisor maintain confidentiality throughout the process?
  5. What procedure does the M&A advisor follow to vet buyers?
  6. Will the sale process disrupt my business?
  7. How will the M&A advisor market my company, and what types of buyers will they target?
  8. Who will actually negotiate the deal?
  9. Can I find the M&A advisor when I search for related industry services on the web?
  10. Is the M&A firm’s fee worth it for the service they provide?

Q1. Do I Have to Pay Upfront Fees to Sell My Business?

In a word, NO! Firms that charge money upfront are usually doing so to cover their overhead or the cost of their Seller informational (get new business) seminars that are conducted in multiple cities.  Many of these companies take money from business owners when they know they’ll have difficulty selling the business. They really don’t care if they don’t sell a certain percentage of businesses because they’re funding their overhead with that upfront money.

The Accelerated Way – At Accelerated Manufacturing Brokers, Inc., we never charge money upfront. If, after reviewing your company information, we don’t think we can sell your business, we won’t ask for or take the listing.  In many cases, we’ll even make suggestions on how to improve your business to make it more attractive to buyers. The only time we see money from a client’s pocket is if we successfully get you to the closing table. Our system is designed to let potential clients know that we’re fully engaged and confident in our ability to sell the business. If someone is asking for upfront money to tell you what your company is worth, they’re likely in the “opinion” business, not the business of selling manufacturing companies.

Q2. How Important Is It To Pick a Specialist Over a Generalist?

When you need heart surgery, do you go to your dentist? The same rule should apply here, especially for the largest transaction of your life.  This is notably important for manufacturing business owners.  Part of being good at the game of manufacturing M&A is being able to identify synergies that might exist between Buyers and Sellers. Will a generalist be able to match a large stamping shop with a progressive die maker so that the stamping company no longer has to outsource that work? If the broker doesn’t even know what a progressive die is, they’d never make the connection, thus leaving important potential buyers out of their marketing efforts.

The Accelerated Way – At Accelerated Manufacturing Brokers, Inc., we’ve been serving the manufacturing sectors for almost 25 years.  Because we’re specialists, we see synergies and can make connections that others can’t.

Q3. How Will the M&A Advisor Establish the Appropriate Price For My Business?

Telling you what you want to hear is not a valid valuation method. If a broker is providing you with a number that seems too good to be true, it probably is. But there is also danger in a broker pricing a listing too low so they can sell it quickly at your expense. The M&A professional should be able to speak intelligently about current market conditions and trading multiples. Even though valuation can be subjective, and include art as well as science, there needs to be logic and generally accepted principles applied.

The Accelerated Way – At Accelerated Manufacturing Brokers, we know that valuing a business is more than just the numbers. We are experts at identifying those aspects of a business that make it unique and positioning the company in the marketplace to achieve the best results. Recently we listed a Midwest industrial equipment repair manufacturing company that had been previously listed with a local generalist firm for 4 years. In less than a year, we achieved a result that was more than 2.5 times the only offer the prior broker achieved.  We also had multiple offers for our client to choose from. We’ll provide you with facts and the reasoning behind our recommended list price, regardless of whether or not it’s what you want to hear.

Q4. How Will the M&A Advisor Maintain Confidentiality Throughout the Process?

For most manufacturers, the disclosure to competitors, customers, or employees that their business is for sale could be devastating to the business. Most brokers will provide a blind ad and require an NDA to be signed before providing a report on the business. Unfortunately, most firms fully identify who their client is in that second step and prior to fully vetting the buyer. It’s also true that most brokers have no idea who they’re dealing with at that stage.  A competitor will likely fill out an NDA as an individual to hide who they are.  Make sure you understand the M&A firm’s procedures before engaging with them.

The Accelerated Way – At Accelerated Manufacturing Brokers, Inc., we consider maintaining confidentiality one of our highest priorities and never advertise who or where our clients are. Even after an NDA is signed, when sending the CIM or offering memorandum, we shield our clients until we know exactly who we’re dealing with and that they are qualified.

Q5. What Procedure Does the M&A Advisor Follow to Vet Buyers?

Continuing the discussion from the question above, find out exactly how the firm vets buyers.  Vetting should be more than just financial. A good M&A Advisor will make an effort to determine if the potential buyer is professionally qualified as well as financially.  This is important to ensure the legacy you’ve created.  Your time should never be wasted with conference calls or meetings with people who are not qualified.

The Accelerated Way – At Accelerated Manufacturing Brokers, Inc., we never disclose who our client is unless we’ve received evidence that the buyer has the financial ability to close the transaction (read our recent article – Step 12).  We ask for financials, investment & bank statements and resumes. This is done before a buyer gets to know the name of your business.  We have an entire department that vets buyers. We don’t like wasting our time, and we won’t waste yours.

Q6. Will The Sale Process Disrupt My Business?

Again, playing on the above questions, if a broker is bringing unqualified people to your business, your company operations will be disrupted. However, that’s not the only time suck.  A good broker will field almost all questions from buyers, so you won’t have to. Think of the broker as your shield and defense against inappropriate questions. Questions regarding your customer list and proprietary processes should be reserved for a period of time when the buyer is committed to the transaction, not before.

The Accelerates Way – At Accelerated Manufacturing Brokers, Inc., we take the time to really know and understand your operations so that we can navigate buyer interactions.  From experience, we know what quality buyers will ask and we know what bank underwriters will ask.  Our process is designed to provide the least disruption to your business possible.

Q7. How will the M&A Advisor Market My Company and What Types of Buyers Will They Target?

Here’s where you really need to be careful. Many firms will ONLY target strategic buyers (larger companies in your same field). That’s low-hanging fruit, and anyone can figure out how to do that. Among that targeted group, some firms will basically conduct a controlled auction process within the identified target group. It’s not an auction in the traditional sense of the word. It’s rather a process where the steps are controlled. Meetings may be only over a certain number of days, with bids or offers due within certain timeframes. Entire M&A firms are based on this business model.  The problem with this model is that it ignores the largest portion of the population buying manufacturing companies in the current market.

That largest segment of the population buying manufacturing companies in the current market is individual buyers leaving corporate America. They’re typically in their early 50’s and perhaps have worked for a Fortune 500 manufacturer. They know what it takes to build a company, and they’re tired of doing it for someone else.  More than other types of buyers, they pay more, and they’re buying to build the company over a longer period.  They’re the ideal buyer because they will respect your legacy, and they’re not buying your company to “strip it and flip it.” There is only one problem with this type of buyer. The typical M&A Advisor has no way to target them. An M&A Advisor or business broker can buy a mailing list of certain types of manufacturing companies, but for individuals, there is no list.

The Accelerated Way – At Accelerated Manufacturing Brokers, Inc., we know how to capture the low-hanging fruit of strategic buyers and private equity firms seeking acquisition within a certain sector. Anyone can do that, and it doesn’t take a lot of talent. What’s harder is attracting quality and qualified buyers who can never be “purchased” as part of an industry mailing list. You have to create the conditions whereby they can find you when the timing is right. The creation of those conditions can only be developed with time and understanding of the sectors one is trying to sell in. Within the manufacturing sectors, Accelerated Manufacturing Brokers, Inc. is arguably the best at being “found.” This is why EVERY category of buyer, including individual, strategic, and private equity, end up on our doorstep.

Q8. Who Will Actually Negotiate the Deal? 

When considering someone to represent your business in an M&A transaction, ask them specifics as to how far into the transaction process they work. A quality representative will ensure that a Letter of Intent (LOI) has certain basic criteria and will navigate the first round of negotiation on a purchase and sale agreement to ensure that it matches the LOI. These basics will save legal fees.

The Accelerated Way – Accelerated Manufacturing Brokers, Inc. will not allow the submission of an LOI to our clients without it including certain basic criteria for our client’s protection. This saves legal fees and ensures an accelerated sale process.

In essence, this is once again an argument for specialization. We discuss above that certain types of buyers (and currently the most active type of buyer in the manufacturing sectors) can’t be found with purchasing a mailing list. How, then, are they found? They’re not; the buyer finds the broker.

The Accelerated Way – At Accelerated Manufacturing Brokers, Inc., we’ve worked for decades to ensure that if someone is shopping for a manufacturing company, it’s next to impossible for that buyer not to end up on our doorstep. Those conditions can only be created over time. They involve so much more than paid advertising. If that was what it took, anyone could do it. What we humbly offer for your consideration as a Seller, take a moment and pretend that you are a buyer seeking an acquisition. As you begin to perform your due diligence, you’ll see what we mean.  Go to Google and give it a try.  Search for “manufacturing business broker.”  You’ll find us. And so will a quality buyer when we are promoting your business. This is perhaps the most powerful reason we can provide for choosing us.

Q10. Is the M&A Firm’s Fee Worth it For the Service They Provide?

On this, we can only address our own Company’s services.

The Accelerated Way – We provide exposure to the best and most qualified manufacturing business buyers nationally. We reach strategic buyers that other brokers would never even think to contact because they don’t fully understand your manufacturing process. Our buyers have paid more than double what other brokers or M&A professionals have been able to achieve. We’ll help you sell to buyers who will respect your legacy. You tell us what that might be worth to you. Don’t settle for less. Contact us today to learn more.

If you are interested in learning more about what we can do for you and your business, please call us at 908-387-1000, or let’s talk.

Topic:  How to Sell Your Manufacturing Business – (The Definitive Guide)