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5 Traits To A Manufacturing Acquisition That Can Double In Size

 

 

Manufacturing Acquisition

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In a recent conversation with a Wall Street finance professional seeking a manufacturing acquisition, we discussed key traits to look for when acquiring a manufacturing company if you want to double its size in the next 5-10 years. This particular buyer was just beginning to examine the possibility of exiting corporate America for manufacturing entrepreneurship. His inspiration was a neighbor who had already made the leap and doubled the size of the manufacturing company he purchased in just a few short years. This potential buyer wanted to know how often we come across “diamonds in the rough.” He loved my answer, which was, “Way more often than you might think.”

 

I went on to explain 5 traits to a manufacturing company acquisition that could double in size easily. Look for these key factors when shopping for a manufacturing business and you’ll find your “diamond in the rough.”

 

5 Traits To A Manufacturing Acquisition That Can Double In Size

 

1. Website:

 

If a manufacturer is retiring and they are in their late 60’s or early 70’s, often times technology has left them in the dust. They may not understand the importance and value of an up–to-date

Manufacturing Acquisition

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website. They may not have one, or they have one that has not been updated in ages. They may not have an on-line product quoting or ordering mechanism. Simple changes can make a manufacturing company more “visible” to potential customers, and, therefore, increase sales.

2. Marketing:

In addition to having an up-to-date website, many older manufacturing business owners do Nothing to market their companies and products. If their customer base is strong and they’ve got the staff in place to scale up, tweaking this one factor can exponentially increase sales.

3. Best practices:

Often times retiring manufacturers built their businesses organically, from scratch. They don’t have an MBA and they’ve built their businesses to the level that their education and stamina will allow, but no further. Looking at a company that already has a great customer base and decent cash flow with the eyes of an all-star business executive, buyers can see opportunity that the Seller missed. It could be simply putting best practices into place on both the manufacturing and corporate side of the business. Many owners work in the business, but they rarely work ON the business. Attention to best practices and strategy can sometimes bring growth without much effort.

4. Modernizing manufacturing product design and procedures:

If the Seller is still drawing parts on a drafting table, the old fashioned way, there’s opportunity to improve. Using modern design software can save hours and have the plant running much more efficiently. Likewise, Sellers who are close to retirement may have been reluctant to move from manual to CNC equipment. Changes that improve the manufacturing process will add to bottom line over time.

5. Look for a manufacturing plant that is NOT running at full capacity:

Many aging business owners will begin to scale back and not push so hard for sales on the approach to retirement. Buyers should look at situations where sales can grow 30% or more without adding people, equipment or additional facilities. We have some manufacturing companies on the market that could literally double capacity without adding people, equipment or real estate. How many businesses can offer that?

 

The key here is to not look for perfection when shopping for a manufacturing acquisition. If they’re doing everything right, there might be little room for growth. Look for niche products and industries where the owner is NOT doing the appropriate marketing or whose systems need to be modernized. Some of these changes can be completed relatively inexpensively with exponential rewards. We’ve seen some companies go from a million in sales to over $10 million just 2 short years later. The difference was the new guy at the helm knew much more about how to grow and scale a business. Do you have what it takes to double the size of a manufacturing acquisition? Click here to see available businesses. Have you done it? Did you use the methods listed above? We invite you to comment and tell us YOUR success story.

 

 

About Frances Brunelle

Frances Brunelle is the founder of Accelerated Manufacturing Brokers, Inc., which specializes in the sale of lower middle-market manufacturing companies nationally. Fran and her team help to ensure the continuity of U.S. Manufacturing by transitioning ownership to the next generation of entrepreneurs. Recently Fran was named to 2020 Most Influential Women in Mid-Market M&A (Mergers & Acquisitions). Fran will also be the host of WAM (Women and Manufacturing) podcast, a Jacket Media production. Fran writes on topics that help manufacturing business owners prepare their companies for sale and navigate the sale process to ensure a positive financial result in support of their retirement.

2 Comments

  1. […] President of Accelerated Manufacturing Brokers, Inc.  Brunelle recently published an article, “Five Traits To A Manufacturing Acquisition That Can Double In Size.” Brunelle states, “This particular acquisition opportunity meets all five criteria, and could […]

  2. Mike Evans on August 28, 2018 at 9:09 pm

    Good stuff …. need to have a pretty good staff too.

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