Every manufacturer eventually seeks some liquidity from their business. Some trade a portion of their equity in exchange for liquidity to facilitate the growth of the company, but more often than not, the liquidity is to fund retirement.
There are 5 major fears manufacturers must face when seeking a liquidity event for retirement:
- Will the sale of the company provide for its continuity?
- Will There Be Future Opportunity for the Staff?
- Could I lose business or employees if people find out I’m selling?
- Can I get a price worthy of the manufacturing business I’ve built?
- Will the Post Sale Schedule Fit My Desired Timing & Lifestyle?
As an M&A professional with over a quarter-century of experience selling manufacturing companies nationally, these are the most frequent fears and questions I’m asked to address by potential clients seeking a liquidity event for retirement. Let’s look at each more closely:
Will the Sale of the Company Provide for Its Continuity?
Most of the manufacturing companies we work with are founder-led organizations where the business is like a beloved child of the founder. As part of the sale process, they want to make sure they’re passing the baton to an acquirer who will ensure its growth and continuity. They want to know that the business will go on after they’re gone and thrive, but still honor the history and legacy of what was built by blood, sweat and sometimes tears.
At Accelerated Manufacturing Brokers, Inc. we address this fear by sharing that the businesses we sell are thriving years later. The buyers we work with have no interest in erasing your history and legacy. On the contrary, they view it as a valuable component of what they’re buying.
The quality of buyers we bring to our clients are highly skilled in business development. In one recent instance, the acquirer grew the company’s revenues over 400% in a short 2-year period.
We’ve all heard nightmare stories of companies that were acquired, stripped and sold off a short time later. We work in a different sandbox with quality buyers who are acquiring for the long-term.
Will There Be Future Opportunity for the Staff?
Manufacturing business owners considering seeking a liquidity event for retirement are usually highly concerned about how their staff will be treated after the acquisition and whether or not there will be future opportunities for them. If an acquirer intends on moving the business out of town or out of state, the employees may lose their jobs. In instances where the manufacturer also owns the real estate, this is even more of a concern because the sale or lease income from the acquirer is often needed to fund retirement.
I’m often struck by the inconsistency of the thought process of potential business sellers. They assume that a large strategic buyer will pay the most for their business and strongly desire that type of buyer. However, large strategic buyers usually have their own facilities, machine tools and skilled workers. They’re after your customer list, and they don’t want to pay for what they don’t need. Employees can experience a bad outcome in this circumstance, as a seller’s business is folded into an existing larger operation.
At Accelerated Manufacturing Brokers, Inc. we address this fear by sharing with potential clients seeking a liquidity event for retirement the various types of buyers who are commonly buying in the current market. One of the largest categories of manufacturing company buyers in recent history has been those leaving very large, sometimes publicly traded manufacturing companies to acquire their way into entrepreneurship. These people acquire where they want to live and keep the businesses in their existing location, as long as there is excess capacity to facilitate growth. But, even if they need to move to facilitate growth, they remain in the community because of the workers.
A great example of this is a tool & die shop we recently sold. After the acquisition, the staff got promotions, raises, and additional benefits including leadership and skills training.
Could I lose business or employees if people find out I’m selling?
If I were to put this top five list of fears manufacturers must face when seeking a liquidity event for retirement in order of importance to my clients, this would likely rank number one. In addition to the potential loss of customers and employees, owners fear what would happen if their competitors catch wind they’re selling. Confidentiality is paramount when selling manufacturing businesses, more than other sectors.
It is very common for brokers and M&A professionals to release data on their clients as well as their name and location with the receipt of an NDA. The problem is it’s typically released prior to the potential buyer being fully vetted both professionally and financially. This should never be.
At Accelerated Manufacturing Brokers, Inc. we address this fear by explaining how our system and procedures are vastly different than others in our industry. No one gets information on our clients unless we know who we’re dealing with and their qualifications. Even then, information is released in stages for the absolute protection of our clients.
You can learn more about how our procedures are different by design here.
Can I Get a Price That is Worthy of the Manufacturing Business I’ve Built?
Manufacturing business owners seeking a liquidity event for retirement want to know that they’re getting a good price. The sale of their business is often funding retirement and very often the largest transaction they will ever be involved in. Brokers and M&A professionals will talk about benchmarks and sale comparables, but how does one calculate value that might not be on a balance sheet? Is value simply a multiple of EBITDA that’s found in a guide book?
At Accelerated Manufacturing Brokers, Inc. we address this fear by thoroughly explaining the factors that affect value. Our clients understand our belief that no two manufacturing companies are the same. They might manufacture the same type of parts for the same industry, but they approach systems, culture and customers differently.
We don’t need to look at a benchmark chart to establish the value of a company in the current market. We’ve been successful in selling manufacturing companies for 26 years. We’ve achieved sale prices for our clients that were more than double offers previously presented by other brokers. We are absolute experts at determining what is unique and special about a particular company and telling that story in a compelling way to achieve the best and often multiple offers for our clients to choose from.
Will the Post-Sale Schedule Fit My Desired Timing & Lifestyle?
The desired post-sale work and transition schedule is different in every case. This is often complicated if there are multiple shareholders desiring different schedules after the closing. Some sellers prefer to continue working for a few years, some want continued work but fewer hours, while others want to exit once training and transition are complete. These concerns often have to be addressed with the spouse of a retiring business owner who wishes to travel or have more time with the grandchildren.
More information on this topic could be found in a Manufacturing Talk Radio interview Fran gave here.
At Accelerated Manufacturing Brokers, Inc. we address this fear of sellers seeking a liquidity event for retirement by explaining to our potential clients that, even with several shareholders all desiring different schedules, we’ve never failed to get our clients what they wanted. We force these conversations early in the process so that we know what we’re aiming for and seek out buyers who are comfortable with the desired schedule.
Accelerated Manufacturing Brokers, Inc. has been successfully addressing the 5 Major Fears Manufacturers Must Face When Seeking a Liquidity Event for Retirement for more than a quarter of a century. We are one of the only firms of our kind selling lower middle-market manufacturing companies nationally.
If you’d like to learn more, connect with us here.