Selling a manufacturing business for most will be the largest transaction of their lives and impact their retirement lifestyle. Therefore, choosing the right M&A Advisor or business broker to represent them is critical.
10 Important Questions Manufacturers Should Ask Before Choosing an M&A Advisor
Selling a manufacturing business will, for most owners, be the largest transaction of their lives and will have a major impact on their retirement lifestyle.
Therefore, choosing the right M&A Advisor or business broker to represent them is critical.
Because most small manufacturing business owners have not been exposed to the M&A world, they sometimes don't know where to start.
In this article, we'll explore the 10 most important questions manufacturers should ask before choosing an M&A Advisor to sell their business.
Here they are:
- Do I have to pay upfront fees to sell my business?
- How important is it to choose a specialist over a generalist?
- How will the M&A Advisor establish the appropriate price for my business?
- How will the M&A Advisor maintain confidentiality throughout the process?
- What procedure does the M&A Advisor follow to vet buyers?
- Will the sale process disrupt my business?
- How will the M&A Advisor market my company, and what types of buyers will they target?
- Who will actually negotiate the deal?
- Can I find the M&A Advisor when I search for related industry services on the web?
- Is the M&A firm's fee worth it for the service they provide?
1. Do I Have to Pay Upfront Fees to Sell My Business?
In a word, NO!
Firms that charge money upfront are usually doing so to cover their overhead or the cost of their Seller informational seminars designed to generate new business.
Many of these companies take money from business owners when they know they'll have difficulty selling the business. They may not care if they don't sell a certain percentage of the businesses they represent because they're funding their overhead with that upfront money.
The Accelerated Way
At Accelerated Manufacturing Brokers, Inc., we never charge money upfront.
If, after reviewing your company information, we don't think we can sell your business, we won't ask for or take the listing.
In many cases, we'll even make suggestions about how to improve your business to make it more attractive to buyers.
The only time we see money from a client's pocket is if we successfully get you to the closing table.
Our system is designed to let potential clients know that we're fully engaged and confident in our ability to sell the business.
If someone is asking for upfront money just to tell you what your company is worth, they're likely in the "opinion" business, not the business of selling manufacturing companies.
2. How Important Is It to Choose a Specialist Over a Generalist?
When you need heart surgery, do you go to your dentist?
The same rule should apply here, especially when you're dealing with the largest transaction of your life.
This is especially important for manufacturing business owners.
Part of being good at the game of manufacturing M&A is being able to identify synergies that may exist between Buyers and Sellers.
Will a generalist be able to match a large stamping shop with a progressive die maker so the stamping company no longer has to outsource that work?
If the broker doesn't even know what a progressive die is, they'd never make the connection, potentially leaving important buyers out of their marketing efforts.
The Accelerated Way
At Accelerated Manufacturing Brokers, Inc., we've been serving the manufacturing sectors since 1994.
Because we're specialists, we see synergies and can make connections that others can't.
3. How Will the M&A Advisor Establish the Appropriate Price for My Business?
Telling you what you want to hear is not a valid valuation method.
If a broker is providing you with a number that seems too good to be true, it probably is.
But there is also danger in a broker pricing a listing too low so they can sell it quickly at your expense.
The M&A professional should be able to speak intelligently about current market conditions and trading multiples.
Even though valuation can be subjective and can include art as well as science, there still needs to be logic and generally accepted principles applied.
The Accelerated Way
At Accelerated Manufacturing Brokers, we know that valuing a business is about more than just the numbers.
We are experts at identifying those aspects of a business that make it unique and positioning the company in the marketplace to achieve the best results.
Recently, we listed a Midwest industrial equipment repair manufacturing company that had previously been listed with a local generalist firm for four years.
In less than a year, we achieved a result that was more than 2.5 times the only offer the prior broker achieved.
We also had multiple offers for our client to choose from.
We'll provide you with the facts and reasoning behind our recommended list price, regardless of whether or not it's what you want to hear.
4. How Will the M&A Advisor Maintain Confidentiality Throughout the Process?
For most manufacturers, disclosure to competitors, customers or employees that their business is for sale could be devastating.
Most brokers will provide a blind ad and require an NDA to be signed before providing a report on the business.
Unfortunately, most firms fully identify who their client is in that second step and before fully vetting the buyer.
It's also true that most brokers have no idea who they're dealing with at that stage.
A competitor may fill out an NDA as an individual to hide who they are.
Make sure you understand the M&A firm's procedures before engaging with them.
The Accelerated Way
At Accelerated Manufacturing Brokers, Inc., we consider maintaining confidentiality one of our highest priorities.
We never advertise who or where our clients are.
Even after an NDA is signed, when we send the CIM or Offering Memorandum, we shield our clients until we know exactly who we're dealing with and that they are qualified.
5. What Procedure Does the M&A Advisor Follow to Vet Buyers?
Continuing the discussion from the question above, find out exactly how the firm vets buyers.
Vetting should involve more than just financial qualification.
A good M&A Advisor will make an effort to determine whether the potential buyer is professionally qualified as well as financially qualified.
This is important to help protect the legacy you've created.
Your time should never be wasted on conference calls or meetings with people who are not qualified.
The Accelerated Way
At Accelerated Manufacturing Brokers, Inc., we never disclose who our client is unless we've received evidence that the buyer has the financial ability to close the transaction.
You can read more about this process in Step 12 of our guide to preparing your manufacturing business for sale.
We ask for financials, investment and bank statements, and resumes.
This is done before a buyer gets to know the name of your business.
We have an entire department that vets buyers.
We don't like wasting our time, and we won't waste yours.
6. Will the Sale Process Disrupt My Business?
Again, building on the questions above, if a broker is bringing unqualified people to your business, your company operations will be disrupted.
However, that's not the only time drain.
A good broker will field almost all questions from buyers so you won't have to.
Think of the broker as your shield and defense against inappropriate questions.
Questions regarding your customer list and proprietary processes should be reserved for a point when the buyer is committed to the transaction, not before.
The Accelerated Way
At Accelerated Manufacturing Brokers, Inc., we take the time to really know and understand your operations so we can navigate buyer interactions.
From experience, we know what quality buyers will ask, and we know what bank underwriters will ask.
Our process is designed to create the least disruption to your business possible.
7. How Will the M&A Advisor Market My Company, and What Types of Buyers Will They Target?
Here's where you really need to be careful.
Many firms will ONLY target strategic buyers — larger companies in your same field.
That's low-hanging fruit, and anyone can figure out how to do that.
Among that targeted group, some firms will essentially conduct a controlled auction process within the identified buyer group.
It's not an auction in the traditional sense of the word. Rather, it's a process where the steps are controlled.
Meetings may take place only over a certain number of days, with bids or offers due within specific timeframes.
Entire M&A firms are built around this business model.
The problem with this model is that it can ignore a large portion of the population buying manufacturing companies in the current market.
Don't Overlook Individual Buyers
One of the largest segments of the population buying manufacturing companies in the current market is individual buyers leaving corporate America.
They're typically in their early 50s and may have worked for a Fortune 500 manufacturer.
They know what it takes to build a company, and they're tired of doing it for someone else.
More than other types of buyers, they may pay more, and they're often buying to build the company over a longer period.
They can be ideal buyers because they may respect your legacy and aren't necessarily buying your company to "strip it and flip it."
There is only one problem with this type of buyer.
The typical M&A Advisor has no direct way to target them.
An M&A Advisor or business broker can buy a mailing list of certain types of manufacturing companies, but for individuals, there is no list.
The Accelerated Way
At Accelerated Manufacturing Brokers, Inc., we know how to capture the low-hanging fruit of strategic buyers and private equity firms seeking acquisitions within a certain sector.
Anyone can do that, and it doesn't take a lot of talent.
What's harder is attracting quality and qualified buyers who can never be "purchased" as part of an industry mailing list.
You have to create the conditions whereby they can find you when the timing is right.
Those conditions can only be developed with time and a deep understanding of the sectors you're trying to sell in.
Within the manufacturing sectors, Accelerated Manufacturing Brokers, Inc. is arguably the best at being "found."
This is why EVERY category of buyer — including individual, strategic and private equity — ends up on our doorstep.
8. Who Will Actually Negotiate the Deal?
When considering someone to represent your business in an M&A transaction, ask them specifically how far into the transaction process they remain involved.
A quality representative will ensure that a Letter of Intent, or LOI, includes certain basic criteria and will help navigate the first round of negotiation on a purchase and sale agreement to make sure it matches the LOI.
These basics can save legal fees.
The Accelerated Way
Accelerated Manufacturing Brokers, Inc. will not allow an LOI to be submitted to our clients unless it includes certain basic criteria for our client's protection.
This saves legal fees and helps ensure an accelerated sale process.
9. Can I Find the M&A Advisor When I Search for Related Industry Services on the Web?
In essence, this is once again an argument for specialization.
We discussed above that certain types of buyers — and currently one of the most active types of buyers in the manufacturing sectors — can't be found simply by purchasing a mailing list.
How, then, are they found?
They're not.
The buyer finds the broker.
The Accelerated Way
At Accelerated Manufacturing Brokers, Inc., we've worked for decades to ensure that if someone is shopping for a manufacturing company, it's next to impossible for that buyer not to end up on our doorstep.
Those conditions can only be created over time.
They involve much more than paid advertising.
If paid advertising were all it took, anyone could do it.
What we humbly offer for your consideration as a Seller is this:
Take a moment and pretend that you are a buyer seeking an acquisition.
As you begin to perform your due diligence, you'll see what we mean.
Go to Google and give it a try.
Search for "manufacturing business broker."
You'll find us.
And so will a quality buyer when we're promoting your business.
This is perhaps one of the most powerful reasons we can provide for choosing us.
10. Is the M&A Firm's Fee Worth It for the Service They Provide?
On this question, we can only address our own company's services.
The Accelerated Way
We provide exposure to some of the best and most qualified manufacturing business buyers nationally.
We reach strategic buyers that other brokers may never even think to contact because they don't fully understand your manufacturing process.
Our buyers have paid more than double what other brokers or M&A professionals have been able to achieve.
We'll help you sell to buyers who will respect your legacy.
You tell us what that might be worth to you.
Don't settle for less.
Choose the Right M&A Advisor Before You Go to Market
Selling your manufacturing company is too important to leave to someone who doesn't understand your industry, your buyers or the complexity of the transaction.
Ask these questions before choosing an M&A Advisor.
The answers will tell you a great deal about who you're trusting with what may be the largest transaction of your life.
If you are interested in learning more about what we can do for you and your business, please call us at 908-387-1000, or let's talk.
Topic: How to Sell Your Manufacturing Business — The Definitive Guide