Specializing in the sale of manufacturing companies nationally, our phones have been busy with potential clients asking about how COVID-19 will affect the sale of their manufacturing companies. There's both good news and bad news to report on this front, and to a large extent, it depends on what sector you’re in.
While this crisis has devastated some businesses, others are not only weathering the storm, but they’re thriving. Manufacturers deemed “critical” by the federal government are not subject to closure and many are seeing an uptick in business.
Manufacturers who are exempt from closure because they're in specific sectors will be some of the most sought-after acquisitions in the United States. Manufacturing has been the darling of lower middle-market M&A for the last few years. That’s about to explode exponentially.
Companies with strong balance sheets are seeking acquisition NOW to ensure they’re well-positioned by Q4 2020. We already see a deal flow uptick with four deals under contract—three of those under contract in the last two weeks, with two being at full list price.
Strategic companies making acquisition are aiming for:
- The addition of complimentary services
- Added customers for their current core services
- Additional cash flow and growth opportunities
- Acquisition of skilled staff
- Increased market share and geographic range
- Acquisition of patents and intellectual property
If you’ve been considering the sale of your manufacturing company, but you’re afraid no one is buying, nothing could be further from the truth.
Manufacturers seeking retirement or expansion through acquisition should act now to reach their goals by Q4. Both Buyers and Sellers can get what they want before the end of this year.
Here’s what the potential timeline looks like:
To reach your goal before the end of Q4, both sides need to start the process NOW.
How The COVID-19 Crisis is Changing the Financing Landscape
For those using financing from an SBA loan product to finance the acquisition, here’s how the COVID-19 crisis has changed things.
While much of the focus on the CARES Act has surrounded the Paycheck Protection Program, there are other aspects of the congressional act that affect new acquisition loans:
- The SBA will pay 6 months of principal & interest from March 27th to September 7th
- Fees are waived during this time period
- Interest rates are capped at 4%
- Maximum loan amount is increased to $10MM
Even if your acquisition timeline doesn’t allow you to take advantage of the 6 months of no payments, acquirers still have the advantage of lower interest rates and no fees if their applications are made in the appropriate timeframe.
These changes will have a profound effect on the market. Buyers are already scrambling to get deals approved to take advantage of these changes.
What Manufacturing Business Owners Should Do Next:
Company owners seeking retirement or expansion can position themselves now to attract the best and most qualified buyers hoping to conclude a transaction before the start of Q4. Sellers can start the process and learn more HERE. There’s never an obligation to proceed and it never hurts to learn what your options are. Information is power.
What Buyers Seeking Acquisition of Manufacturing Companies Should Do Next:
It’s equally important for buyers to understand how their competitors are approaching acquisitions and how to find acquisition targets that can provide expanded product and service offerings, geographic range, and solve for skills gap issues. Buyers can connect to learn more HERE. Buyers can also view current quality offerings HERE