In this article, I’ll share a real-life story of a large aerospace CNC component manufacturer and their plan to steal work from smaller manufacturers working in the same sector. I do so in an effort to educate and protect the lower middle market aerospace component manufacturers and share how to avoid manufacturing raiders, robbers, and reprobates.
As a 30-year veteran in manufacturing M&A, I’m often contacted by large strategic buyers seeking to grow rapidly through acquisition, even though my firm only represents sellers. We often connect with these buyers to learn more about their capabilities, goals, business acumen, and principles so that we can engage with them if they’re aligned with current or future clients.
In a recent call with a large venture-backed firm, their plan for growth and character were revealed. The company had massive production capabilities, enhanced through robotics, automation, and software. What they requested of me will shock you.
They didn’t really want to buy companies, which had been the premise for the call. What they hoped to learn was who was making parts for aerospace sector leaders. “We only want the parts,” they said. I explained if a manufacturer was a Tier I supplier to Lockheed Martin, Pratt & Whitney, GE Aerospace, Boeing, Airbus, Rolls-Royce, etc., the manufacturer wasn’t going to just sell them the product line. When they responded, I understood what I was dealing with. They were manufacturing raiders, robbers, and reprobates.
They basically said that they could make the parts better than anyone because of their advanced technology. They would offer to buy the product line at a steep discount. If the manufacturer refused, they would go to the OEM and try to take the work based on their size and capabilities.
My response was swift: “If you pull stunts like that, you won’t be able to buy anything in the sector.” The founder proceeded to explain how fast their investors were requiring them to grow. He said, “What are WE going to do about this?” Well, cupcake, there is NO WE. My firm will never do business with you.
Rather than go through a normal M&A process to acquire companies, he was seeking speed through theft. This, my manufacturing friends, is why you should have a barrier between you and any potential buyer. This is why M&A professionals need to thoroughly vet buyers for more than just financial capability. The reality is that there are manufacturing raiders, robbers, and reprobates out there who will try to steal your company without a gun.