Competition for quality manufacturing companies is at an all-time high. This was recently evidenced by twelve offers submitted on an aerospace-related listing, which closed in August. The deal took only four months from launch to closing, which also speaks to interest and competition. As you might imagine, several potential acquirers were very disappointed. I write to help those who were disappointed and share how the very smart buyer won the acquisition against the competition.
Description of the Client:
My client was the manufacturer of patented and trademarked lock washers used to secure nuts and bolts from vibrating loose in challenging environments. Their products completely eliminated the need for safety wire, thus lowering the cost and weight of military aircraft. Although the products were applicable to other military and commercial aircraft platforms, the client, on the approach to retirement, had not sought to further exploit the products’ capabilities. This was a first-generation family-owned business. The husband and wife team ran the business remotely, with their son-in-law running the day-to-day operation in another state. The sale of the Company was initiated because of the son-in-law’s desire to retire.
Description of the Buyer:
The buyer is a privately held company and a leading provider of aircraft parts manufacturing, aircraft component repair and overhaul, rotables management, and related engineering services to the aviation industry worldwide. The Company has over 1,000 FAA-approved parts, with four approved production facilities and six MRO Centers of Excellence.
Deal Challenges:
- The Seller was designated on Lockheed Martin drawings. This meant that the deal had to be structured as a stock sale.
- The client was located in a very rural area. To facilitate growth, the operation would have to move to a much larger facility.
- The client was AS9100 certified, so an acquirer had to be the same to avoid issues with the largest customer.
- There was a very large customer concentration. The buyer’s experience needed to be such that they would be welcomed by Lockheed Martin.
- Although the sale was sparked by the son-in-law’s desire to retire, he wanted to work at least another full year after the acquisition.
- The owners were living in another state. They did not want an extended transition period because they were already semi-retired. This meant we were tasked with finding a buyer who wouldn’t need a lot of hand-holding.
- The Seller knew their product had much broader applications, so they wanted a buyer who knew how to get the product onto different platforms and really grow the brand.
What the Buyer Did to Win:
- Their experience alone was enough to win them the deal, but they did several other things right, leading to success against the competition.
- The Seller got the desired stock sale with a creative F-reorganization to satisfy the buyer’s transaction needs. The buyer very patiently explained this concept to the family in such a way that they understood the need and the benefits.
- The buyer didn’t care about the customer concentration. They were already dealing with all the major companies in the aerospace industry and were very well known.
- The buyer had multiple facilities that could easily encompass the operation, and they already held the AS9100, as well as other certifications.
- They agreed to compensate the son-in-law for a complete year, even if the business moved within a few months.
- With a bank of fabulous engineers on staff, there was no need for an extensive transition period.
- Even before closing, leaders within the buying entity were working to expand product visibility.
- The sale process is always emotional for a seller, especially when they are the founder. Even though the buyer was a much larger company, they were respectful and patient at every turn. This buyer was the only one who listened closely enough to understand how important the son-in-law was to the Seller’s decision-making process.
- Lastly, the buyer offered an all-cash deal and a fast closing. There were no bank underwriters to deal with.
The Conclusion:
The Accelerated Manufacturing Brokers Team achieved everything this client asked for, and we’ll enjoy watching the buyer further develop the product applications and platforms it appears on. We wish our client a very happy retirement. Also, best wishes to the very smart buyer who won the acquisition against the competition!