If potential buyers keep losing to competitors, they should consider looking at “diamonds in the rough." This opportunity is one of those.
Why Strong Manufacturers May Still Lack Modern Business Systems
When founder-led, lower-middle-market manufacturing companies are sold, the manufacturing operation may be golden. However, these companies sometimes lack a formal business development function or the strong operational controls that come with implementing an enterprise resource planning system.
Retiring manufacturing business owners are often at a stage in life when they have not kept pace with the remarkable technologies now available to provide visibility into every aspect of their companies.
As retirement approaches, implementing an ERP system may simply feel too daunting.
Operational Gaps Can Create Opportunities for Buyers
Many buyers seeking a manufacturing acquisition will shy away from a company that lacks these systems and processes.
However, an opportunity may exist to significantly increase sales if a buyer is willing to invest some time and effort.
I recently published an article titled The Search for an Enduringly Profitable Manufacturing Business.
In that article, I explain that when an acquisition target is perfect, it attracts tremendous competition and often receives multiple offers.
Buyers who repeatedly lose opportunities to competitors should consider looking for “diamonds in the rough.”
What Makes a Manufacturing Company a Diamond in the Rough?
I define a diamond in the rough as a company with the following characteristics:
- Strong cash flow
- Low debt
- Repeat business
- Hard-to-find manufacturing capabilities
- A strong, tenured workforce with younger managers
- Continual investment in improved manufacturing capabilities
- Available capacity and room to grow
- Limited dependence on the seller
If all these qualities are present—and you have the knowledge to implement an ERP system and business development best practices—you may have found a diamond in the rough that can grow substantially.
Featured Manufacturing Acquisition: Gear Manufacturer
This manufacturing acquisition opportunity generates more than $3 million in adjusted EBITDA and offers several attractive capabilities:
- The ability to manufacture gears ranging in size from a dime to 10 feet
- Reverse-engineering capabilities for any type of gear
- A young but tenured workforce
- Substantial investment in new equipment
Request Confidential Information
To learn more about this manufacturing acquisition opportunity, you can request an NDA here.