Tips For Buyers
What every buyer should know
In the current market, it's common for manufacturers to receive multiple offers for their business. For most retiring manufacturing executives, the transaction will be about more than money. Sure, they want a good price to help them fund retirement, but it's also about their legacy.
Our clients want to know that the company they built with their blood, sweat and tears will live beyond their involvement.
Our sellers want to know that the employees who helped make them successful will not just have jobs, but have opportunity. Continue reading below on how to make yourself stand out from the crowd.
Dealing with a broker
M&A professionals waste an inordinate amount of time weeding out tire kickers and competitors trying to find out whom they have listed. As a buyer, you may be reluctant to share your information with a broker before you're sure you want to buy a particular listing.
Accelerated Manufacturing Brokers is contractually obligated to know who we're dealing with and fully vet them both professionally and financially before disclosing who our client is. It's an obligation that we take seriously.
If you're at the beginning of the process and not sure where you want to land, that's fine. We can still help you, but we expect you to give us the information necessary to help. Here's what we look for:
- Your real name and address — in this day and age, no one is invisible. If we can't verify who you are, you won't get to first base. We understand that you might be employed and confidentiality is critical. We get it, and we won't violate your trust. But if we can't verify who you are, we'll put you in our "no-fly zone." That means you'll be restricted from receiving information on our listings.
- Make us comfortable with your financial picture. We don't need to know everything, but we need to know that you're qualified to close the deal. That means down payment, credit score and prequalification with a lender. If you don't have a lender, we can help.
- Tell us your work history and what you're good at. This will help us match you to the appropriate opportunity. It will also help us explain to our client why you're a good match. They're ready to retire, so they don't want to hold your hand indefinitely while you learn a new business. Remember, legacy issues are important to those retiring. We may ask for your resume. Don't be offended by this. Not all manufacturing companies are right for someone without engineering experience, but some are. Our goal is to find the RIGHT match for both sides.
- Give us detailed criteria including desired cash flow, geography and manufacturing sectors. The more specific you get, the quicker we can help. A special note on this one. If you're a strategic buyer who wants only the customers and some of the employees, we need to know that. We can find opportunities that suit your requirements, but don't waste our time. We are always exclusively engaged with our clients and we know what their goals are. Some simply won't sell to you if you're only buying particular components. Help us help you by giving us the information we need.
Meeting the seller
Whether you have manufacturing experience or not, there are certain rules of etiquette when meeting the seller. As you speak with an owner and tour the facility, you will undoubtedly see things that you would change and/or do differently.
Many of those changes are how you will bring growth to the business that you buy. You may be smarter and have better management and communication skills than the seller. However, rudeness is not a skill. It doesn't matter how you think you can improve their business, it's their business.
You might have an MBA from Harvard, but this guy may have built a business that supported families over the course of 50 years on only a high school education. Be respectful or you might not get to the next step. Here's what manufacturing business owners want to hear from you:
- First and foremost, who are you, and why do you want to acquire this type of business? One of our most common types of buyer in the current market are guys leaving corporate America. They seek acquisition within the manufacturing sectors because of the potential return on investment. If you don't have a manufacturing background, you better explain quickly how you're not going to kill the seller's "child."
- Even though we vetted you financially, the guy in the owner's chair wants to hear from you that you can afford the acquisition. I'm not saying don't negotiate; of course you will. But, if three buyers visited and you're the only one that didn't address financial capability, you'll be working from a deficit. Let the Seller know you're financially qualified and what your timeframe is.
- Be respectful of the seller's time. He's got a business to run and doesn't want to see you sit there and try to figure out what you need to ask. Come prepared.
- If you see good things that maybe you didn't expect. Be complimentary. You don't lose your right to negotiate by saying something positive. Remember this may be a more emotional than a financial decision for many. They need to LIKE you.
- Our clients have been fully educated on the fact that they will be required to work to transition the company to a buyer. However, they may lean more toward an experienced buyer whose hand they don't have to hold for a long time. Be aware and be able to address this issue.
- Be trustworthy. Most transactions will require some form of Seller financing to ensure the owner's cooperation with the transition. He'll look for evidence of your character.
One of our all-time favorite clients told a buyer to shove his full-price offer "where the sun don't shine." The reason? The day after our initial meeting the Seller was contacted directly to see if he was interested in going around the professionals who were engaged to help him sell. Our client reasoned that he would never get the portion of the purchase price that was held in a note because of the buyer's character. Within a month there were two other full-price offers for our client to choose from.
Our clients are people of character and they want acquirers who are as well.
Submitting an LOI for a manufacturing business
Your offer should have certain components to help you stand out from the crowd. As you consider these components, put yourself in the shoes of the seller and ask yourself how he or she will feel as they review your offer:
- Design a cover letter where you can say some things that may be inappropriate for the actual LOI. Acknowledge the seller's hard work and how far the business grew under their leadership.
- Give them some color on how you'll respect their legacy, but grow the business.
- Give them specific time frames for due diligence and closing. Include deadlines for obtaining your financing.
- Negotiating strategies aside, make sure your offer doesn't offend. We get that your first offer might not be your best. However, in today's market, sellers have choices. If your offer is too low, you might not get a second chance.
All about relationships
For the Accelerated Manufacturing Brokers team, this is all about relationships. We've made life-long friends of some who have purchased businesses through us. We stay in touch and cheer their success. We're starting to sell some of the same businesses we sold to buyers over the years. Being entrusted to sell the same business twice is the ULTIMATE COMPLIMENT that we're honored to receive.
We can help find the perfect acquisition
