4 Key Components To An Offer To Purchase A Mfg. Company

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4 Key Components To An Offer To Purchase A Mfg. Company

As manufacturing business brokers selling nationally, we’re seeing increased competition for the acquisition of good manufacturing companies. Most companies we sell have multiple offers for the Seller to choose from. This is likely to continue for the next few years. If you’re submitting an offer to purchase a manufacturing company, here are some things to consider.

Your offer should have certain components to help you stand out from the crowd. As you consider these key components to an offer to purchase, put yourself in the shoes of the Seller and ask yourself how he or she will feel as they review your offer:

1. Include A Cover Letter – Be Complimentary

Design a cover letter where you can say some things that may be appropriate for a Letter of Intent (LOI) but inappropriate for the actual offer to purchase.  Acknowledge the Seller’s hard work and how far the business grew under their leadership. You may see tons of things that you would change and perhaps do better. Remember that the decision to sell and whom to sell to is sometimes as much emotional as it is financial. The Seller needs to LIKE you. Buyers who understand this have the advantage.

2. Respect Their Legacy – But Provide Vision For Growth

Give them some color on how you’ll respect their legacy, but grow the business. So this is huge for a number of reasons. Everyone has an ego. Sellers want to know that what they built will live on after they’re gone. More than that, they are concerned for their employees. Most Sellers want to know that the employees will have more opportunity because you have plans to grow the business. Also, the sale of most manufacturing companies require some level of Seller financing. As a buyer you have to make the Seller confident that you’ve got the chops to both run and grow the company. If you don’t, they’ll view their Seller note at risk and will likely gravitate to a buyer who they know will grow the business and, therefore, have the ability to pay.

3. Define The Timeline – Be Decisive

Give them specific time frames for due diligence and closing. Include deadlines for obtaining your financing. Most businesses we sell have a 30-day due diligence period to verify the exorbitant information we’ve provided prior to the submission of the LOI. If you can’t figure out in that time frame whether or not you want to buy the business, you’re probably not decisive enough to run the operation. Remember, Seller’s in this market are receiving multiple offers. They’re not going to take their business off the market while you take your time making a decision.

4. Avoid Low-balling To The Point Of Offending

Negotiating strategies aside, make sure your offer to purchase doesn’t offend. We understand that your first offer might not be your best. However, in today’s market, Seller’s have choices. If your offer is too low, you might not get a second chance. Look at the length of time you will own the business, and the expected growth rate. Will some additional dollars over the course of your ownership really make that much of a difference? If you lose to a competing buyer, you might not ever find out.

Using these 4 key components to your offer to purchase a manufacturing company will help you stand out from the crowd of buyers and get the quality company you want. For more tips on buying a manufacturing company visit www.AcceleratedMfgBroker.com.

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