The largest category of buyer we’re seeing today are individuals who’ve been wildly successful in upper management of fortune 500 manufacturing companies. They’re making their exit because they’ve got money to spend; they’re tired of making other people rich and they know it may be only a matter of time before they’re outsourced or downsized. Rather than find another job in their early fifties, they’re making the leap into entrepreneurship. There’s only one problem with this category of first- time buyers: they can be indecisive or careful to the point of not being competitive.
Last month we featured a CNC Aerospace company for sale. Their margins were great, so we had dozens of inquiries almost instantly. Some of these potential buyers were indecisive about sharing their background and experience so we knew whether or not they were a good fit. They were indecisive about sharing enough of their financial condition so that we knew they were qualified. They were indecisive when we told them they had to move quickly if they were interested because we had so many other inquiries. They were then surprised when we told them we had received a full price offer and were now in an exclusionary period where negotiations with all other parties had to contractually cease. They lost the opportunity because of their indecision and lack of speed.
We later learned that some of them were incredibly qualified both financially and experientially. We’re now helping these buyers find alternative acquisitions. The buyer who moved forward with this transaction wasted no time providing their entire history and both engineering and financial capabilities. They offered to meet with us and the Seller ASAP, and we ended up doing so during the Christmas holiday week. They were smart enough to know what they were looking at, and to move with stealth speed. We had some very surprised and disappointed individuals and companies during the first week of January, when we told them the listing was off the market.
If you are actively seeking an acquisition in the manufacturing sector, here’s what you need to know:
• Good companies are selling very quickly. If you delay, you’ll probably lose the opportunity.
• Manufacturing companies are the most sought after acquisition in America, especially companies in a niche market.
• Multiples are on the rise. If you’re telling the broker that you won’t pay more than 3 times cash flow, they’re going to quickly move on to a different buyer and easily get a 4-6 multiple.
• If you’re dragging out the closing process beyond the point of the exclusionary period, beware that there may be a half a dozen buyers on your heals praying you don’t meet your closing deadlines.
• The intermediary can help you succeed and make your case to the Seller as to why YOU are the best choice to acquire the business. Treat them accordingly and give them the tools they need to have a full picture of who you are as a buyer.
We really are in a unique time. It is a time in manufacturing business brokerage that we’ve not seen in a decade. The market is booming and the competition amongst buyers is fierce. My company will close over $10 million in businesses in the next 5 weeks and we have $70 million more in the pipeline. Tell us in detail what you’re looking for and we’ll find it, guide you through the process and help you successfully get to the closing table. Go to our form HERE to share with us your criteria and to get on our list of buyers and be the first to know when a new listing is marketed.