As an M&A professional selling exclusively within the manufacturing sectors, I’ve compiled a list of questions that every buyer should be asking before acquiring a manufacturing company.
On The Company History
- How and why did the company start?
- What were the major milestones?
- How much has it grown from inception until now?
- Who are the shareholders?
- Are they all on board with the sale?
On Strategy & Market Potential
- What are the key risks to this business?
- What are the major impediments to corporate growth?
- Are you aware of any new technology that will disrupt the industry?
- What markets exist for your products and services that you’re not going after?
- What is the one strategy, if implemented, would be a game changer for the company?
- What are the best opportunities for growth?
- When was the last time you increased prices?
- Do you feel there is room in your current pricing for an increase, without losing customers?
On Your Competition
- Who are your three main competitors?
- How do you differentiate yourself from them?
- When you lose an order to a competitor, what is the most common reason?
- Thinking of your closest competitor in size, what do they do better than you?
- Who are the most dominate industry players? What are their strengths and weaknesses?
- How can you better position yourself against the competition?
On Marketing
- Describe any company marketing and advertising campaigns.
- What is your annual marketing budget?
- What trade associations do you belong to?
- What is your level of participation in your trade associations?
- Do you market to existing customers to obtain more work?
- When was your website last updated?
- Do you utilize social media? What venues?
- Do you promote your business through Google AdWords?
- Who handles social media for your company?
On Sales
- Describe the typical sales process from order to delivery and installation.
- Describe who on staff is dealing with the customer at every stage of the sale cycle.
- Describe how a quote is generated.
- Is your quoting system computerized?
- How far back in history do you have quoting records?
- Is there a minimum profit margin added to quotes?
- Do you have a standard shop rate? What is it?
- Do you track actual time on a project in comparison to the time quoted?
- Do you have an inside sales force?
- Do you have outside sales reps?
- How is the sales force compensated?
- How critical is the owner to the sales process?
- Who besides the owner are the customers accustomed to speaking with?
On Operations
- What industry certifications does the company hold?
- Are there other certifications, which if obtained, would help the growth of the company?
- What are the main production bottlenecks right now? What is the cost to remedy?
- Any known or suspected deferred maintenance?
- As to equipment, if money were no object, I’d _____________________. Why?
- How many shifts do you currently run and what hours?
- What is the remaining % capacity of the existing shifts?
- What is the remaining % capacity of the current building and staff?
- What would have to change in order to double sales?
- Describe safety programs and training.
Human Resources
- Do you use a professional payroll service? Who interacts with the payroll company?
- Any union contracts? Any suspected union organizing activity?
- Are there any employees who would be ready to retire in the next few years?
- Do you have a plant manager? Describe their level of expertise.
- Describe any training programs in the last three years.
- Describe all employee benefits?
- Do you have a bonus or profit sharing programs?
- Do employees receive annual raises?
- Are there any employees, (family members) receiving an above market pay rate?
Facility
- Do you own or rent?
- If owned, do you prefer to lease or sell and under what terms?
- If you rent, what are you paying and when does the current lease expire?
- Are there renewal options?
- Describe the relationship with the landlord.
- Any known or deferred maintenance?
- Describe the top 5 facility needs.
Information Technology (IT)
- What software systems are currently used in the business?
- What are the top 5 tech needs for the company?
- What software if installed would be most helpful to the business?
- Does your current staff welcome technology improvements and changes?
Suppliers
- Describe your supplier sourcing procedures? Who performs this function?
- Any sole suppliers of products or services?
- Any quality or dependability issues with suppliers?
- What are your supplier payment terms?
Financial
- What accounting software does the company use?
- When was the software last updated?
- What are your payment terms with customers?
- Do you offer a discount for early payment? How many, if any, take advantage of the discount?
- What is your average A/R aging?
- How much bad debt have you written off in the last 5 years?
- How much capital is needed to run the company for a 30-day period?
- What is your average A/P aging?
- Are you on C.O.D. with any of your suppliers?
- How much of your income comes from your top customer?
- How much of your income comes from your top 10 customers?
- How much of your income comes from the top industry served?
Legal
- Have there been any lawsuits in the last 3 years?
- Any workplace accidents in the last 3 years?
- Any EEOC issues in the last 3 years?
- Any OSHA issues in the last 3 years?
- What warranties does your company provide on its products?
- Any warranty claims in the last 3 years?
- Any known or suspected legal, regulatory or government issues?
Personal
- Why do you want to sell the company?
- How long will you remain for training and transition?
- Would you consider a consulting arrangement on an as needed basis after transition?
- Will you be moving away from the area?
- If you were 30 years younger and money was not an obstacle, what would you do to grow this business?
- What do you most want to see in a buyer?
- What are your major concerns about the sale of the company?
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