As a specialist in selling lower middle market manufacturing companies, I’ve seen almost everything over the last thirty years. The previous two weeks were a strong reminder about one mistake manufacturing business owners often make and how it can affect the sale of your business.
During the last two weeks, my firm closed the sale of two different manufacturing companies in different parts of the country. One business was the fastest list-to-closing period in my company’s history; the other was the longest.
For one deal, we launched our marketing campaign in April. We vetted buyers and invited the best of the bunch for facility visits in May. We were under contract in June and closed in September.
We found the right buyer just as quickly for the other, and an LOI was submitted in short order. However, it was almost four months before the LOI was signed. And the closing? That took place 18 months later.
What was the difference? The attorney for each seller.
In the first example, the attorney had M&A experience. In the second deal, the attorney had none. Therein lies the mistake that can trainwreck your closing schedule. Often, manufacturing business owners have a trusted attorney they’ve known for decades. Perhaps this attorney did the closing for their real estate and maybe helped with a collection issue over the years. When considering someone to represent you for what is likely the largest transaction of your life, you need an attorney with M&A experience as part of your advisory team.
In the example above, the attorney didn’t know the basics of what is customary in a lower-middle market transaction. They were unfamiliar with the requirements of working capital or reps and warranties. Every step of the process was painfully long, requiring immense patience and the buyer and seller to spend much more in attorney’s fees than they otherwise would have.
There was no reason the deal should not have closed within 90 days of the LOI execution. It would have if my client’s attorney understood the basics of lower middle market M&A. Unfortunately, our mutual client is the one who suffered. The buyer in this deal is undoubtedly the most patient and determined I’ve seen in thirty years.
Manufacturing business owners – get an attorney with M&A experience! If you don’t, you’ll regret it later and end up paying a lot more.