At Accelerated Manufacturing Brokers, Inc., we specialize in the sale of lower middle-market manufacturing companies and we sell nationally. Our process is different than many other M&A professionals. This article is designed to help those seeking to buy a manufacturing company understand the process, that is the AMB process.
There are essentially 12 steps to our process which are listed here and discussed in detail below:
Step 1 – The NDA
Step 2 – Review the Pitchbook
Step 3 – Professional & Financial Qualification
Step 4 – Access to the Data-room and Company Financials
Step 5 – Call with the Broker
Step 6 – Follow up Q&A if Needed
Step 7 – Conference Call with the Seller
Step 8 – Facility Tour
Step 9 – Post Visit Q&A if Needed
Step 10 – LOI Submission
Step 11 – Due Diligence
Step 12 – Closing
Let’s take a closer look at each step:
Step 1 – The NDA
We don’t provide information about our client companies without an NDA in place. If you call our office asking for “just a few quick questions,” you’ll be asked to fill out an NDA. This is a contractual obligation to our clients, which we take very seriously.
We don’t automatically accept an NDA, then provide all our client’s information. We want to know who we’re dealing with. If you’re giving a fake address or claiming to be a company that doesn’t exist, you won’t get far through the process. Many individuals leaving corporate America seeking their first acquisition claim to be a private equity firm. This will stall the process because it takes us time to investigate who you are. In the meantime, others are speeding through the process and you may lose the opportunity.
Step 2 – Review The Pitchbook
Once we’ve accepted your NDA, we’ll provide you with the pitchbook on the target business. M&A firms call this by different names: An Offering Memorandum, a CIM, or a pitch deck. You’ll find ours different than most. In it, we do not disclose our client’s name or location. However, the pitchbook will answer the most logical questions a smart buyer will ask.
Step 3 – Professional & Financial Qualification
If a buyer wishes to move beyond this point, we have a contractual obligation to vet each one, both on a professional and financial level. Most of our work is with founder-led or family-run manufacturing companies. They care more than most if you have industry experience. Sometimes if there is a strong enough bench of manufacturing and engineering talent in the organization, they may be more concerned about solving for what they weren’t so good at, which is often business development or a sales/marketing function. We also ensure that someone has the financial capability to buy the target company. We don’t want to waste our client’s time.
Sometimes there is enough information in the public domain about a potential acquirer that we won’t ask for this. If a PE firm has several holdings within the manufacturing sectors, we may not ask. Occasionally, there is also enough information on individual buyers as well. If we’re asking, we simply don’t have enough information to fulfill the duties to our client. We find that serious and quality buyers respect this part of our process.
As a side note on this, many companies go to market without a price. During the financial qualification process, buyers will sometimes say they don’t know what to provide unless we tell them the price or we tell them what an appropriate down payment is. Really? There’s an adjusted EBITDA or SDE chart in the book; if you can’t figure out what an appropriate down payment is, you’re not qualified to buy the company.
Give us the information we need to help you through the process. If you don’t, someone will beat you to it – every time.
Step 4 – Access to the Data-Room & Company Financials
Once you’re through the vetting process, you’ll be given access to the data room. In it, you can expect to find three years of financial statements and tax returns, (sometimes more). You’ll also find an employee census with position, rate of pay, last raise and expected remaining work life, together with an equipment list. For some listings, we may have a deeper level of information at this stage.
Step 5 – Call with the Broker
Only at this stage will we schedule a call with the broker. Over the course of many years, we’ve found that a call prior to exposure to the data room is not productive.
Step 6 – Follow-up Q&A if Needed
Often questions come up during this call that require further documentation. We endeavor to provide an appropriate level of information prior to a client call to make it as productive as possible.
Step 7 – Conference Call with the Seller
We find this to be an important step preceding a facility visit. We block out an hour of time for this call. During it, even though you’ve been introduced to Accelerated, you’ll be asked to provide your background to the Seller. They want to hear in your own words why you want to buy their company. This is a great opportunity to get a flavor of the company and the Seller’s personality, and they yours.
Step 8 – Facility Tour
Provided the conference call goes well, we’ll schedule a facility tour. We find that doing the Seller call first breaks the ice, and the parties are more comfortable during a visit.
Step 9 – Post-Visit Q&A
Visits often lead to more questions. Our approach to M&A is to provide as much information as possible to ensure that when an LOI is submitted, there’s a high likelihood the deal will close. Occasionally buyers will ask questions that we don’t think are appropriate in a pre-LOI time frame. We’ll tell you if that is the case, but generally speaking, we prefer more questions upfront. That said, if you suffer from analysis paralysis, understand you might lose the opportunity. Just because we’re answering your questions, it doesn’t mean we’re not moving other quality buyers through the process.
Step 10 – LOI Submission
Often we’re asked to review an LOI before submission to the client, especially when there is competition for the acquisition. We’ll gladly provide guidance, especially if we know an item is a deal-breaker. Some things that we look for in an LOI are defined timelines for due diligence and closing and a clear purchase price and method of payment, not something that is to be determined in the future. See our article on Critical Elements of a Letter of Intent (LOI). If you need an acquisition loan, we want to know the amount of your equity injection, as this speaks to the likelihood of loan approval. We’ll also seek a deadline for loan application and submission of the purchase and sale agreement. Our goal is to make sure the parties are on the same page on all key elements to avoid problems later.
Step 11 – Due Diligence
Once the LOI is executed, you’ll be granted access to other folders within the data room. We have a proprietary due diligence tracker that we will incorporate your specific questions into. It’s designed to track the date of a request to the specific category, provide comments and where in the data room the item can be found. To speed the sale process, your lender and attorney can be given access to the tracker and the data room.
Toward the end of due diligence, you’ll be required to submit your purchase and sale agreement. AMB will take a first pass at this document to ensure that it aligns with the LOI. From there, each side’s attorney will take over.
Step 12 – Closing
There will be a roller coaster of emotions on the part of both the Seller and you, the Buyer, during this process. We’ll help you manage it by getting the data needed to become comfortable with the purchase. If you buy a manufacturing business through us, you’ve got a friend in the industry. We’ll remain in touch and cheer on your success. Our relationship with various buyers over time has included building a new website for them, helping them find add-on acquisitions, getting them interviews with major trade publications and sometimes selling the same business years later as you the buyer, become the seller and enter retirement.
The Baker’s Dozen
Here’s a bonus #13 on our process – We’re not fans of a controlled process. Controlled “Auction” processes push people with artificial deadlines. People submit LOIs when they’re not even sure they want to proceed…and the majority of times, they don’t because they didn’t know enough about the target company to make an intelligent acquisition decision. We’d rather facilitate a deep understanding and establishment of a quality, long-term relationship. This is why we close between 97-98% of the manufacturing companies we list.
We hope this helps you understand our sale process. It’s different than many M&A firms, but it’s designed to protect clients, not waste everyone’s time and get both sides to the finish line with their relationship intact so that they can work together through transition.
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