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Buying A Manufacturing Business – Why You Should Also Acquire The Real Estate

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Buying A Manufacturing Business – Why You Should Also Acquire The Real Estate

When acquiring a manufacturing company, first-time buyers often struggle with whether or not to buy the real estate. Allow me to explain in one little word why it is imperative that you do. Control.

Consider The Worst Case Scenario

In my view, it is a must for those buying manufacturing companies to control the real estate. To illustrate my point, let’s look at the worst-case scenario. Suppose the retiring Seller dies a few short years after retirement. The real estate is then controlled by someone who sees an opportunity for additional funds. When it’s time for lease renewal, they hold you for ransom, asking for an exorbitant increase. What would be the choices available to you? Sure you could find another location and move, but the cost of moving machine tools can be exorbitant.  Also consider the disruption to your business!

Are There Situations When You Should Not Acquire The Real Estate?

Manufacturing business acquirers should avoid buying the real estate when the current building can’t accommodate increased capacity and growth. Other considerations include a clean environmental bill of health.

The bottom line, if the building is “clean” and can accommodate growth, it should be acquired at the time of the business acquisition. Your chance of negotiating an appropriate deal will increase when it’s done in conjunction with the business purchase.

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 is also the host of the 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.

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