The Patience To Get The Best Result
The process of selling a manufacturing company takes some time, especially if you want to find the RIGHT buyer. By “right” I mean a buyer who will respect, protect and grow your legacy, rather than make massive cuts in an effort to increase cash flow so they can “flip” the company as quickly as possible. Retiring manufacturing business owners sometimes think that selling to a big company will bring the best result. But in reality, “big” is sometimes code for “jackass.” Sometimes the larger they are, the less they care about people and relationships.
Repeatedly I am asked by manufacturers nationally who are in the process of choosing a broker, whether or not I sell to large companies in their industry and/or private equities. My response is always the same, “Of course I do, but I consider that low hanging fruit, and probably not the best result for you.” Their shocked response is never a surprise to me. I go on to explain that anybody can find large companies in the same industry or private equity companies that already own something in the same sector. It takes no talent and very little effort. I also explain why these two easy choices are usually not the best:
• In the case of larger companies, they already have their staff, facilities and machinery in place so they usually won’t need yours. Their interest is in your cash flow and customer list. The rest usually doesn’t interest them. That means that in addition to your employees getting screwed, you will not get as much for your business.
• In the case of many private equities, they are interested in one thing only – the bottom line and how to increase it with lightening speed. Improving the bottom line means more acquisitions in the sector to increase sales and cutting the overlaps to decrease costs. The goal of course is to build a larger organization with greater cash flow as quickly as possible so they can sell the organization for a hefty profit. There are PE firms that operate differently, under a buy and build philosophy for the long term. However, they are few and far between.
For the small manufacturing companies that I am privileged to work with nationally, either of the above scenarios would simply be unacceptable. My clients want to know that the company on which they spent their blood sweat and tears will continue on and grow after they exit. My clients actually care about their staff. For one recent client this was incredibly important. Almost the entire staff came up through his apprenticeship program and had been with him since high school. They were like sons.
But getting to a different result requires a bit more effort. It requires a lot of patience, sifting and vetting out of buyers who are not appropriate. Buyer visits to a manufacturing facility can disrupt the business and distract the owner’s focus at a time when it should be laser like. A good broker or M&A intermediary will shield you from the nonsense. This is where you need patience to get the best result for the sale of your manufacturing business. On a deal we closed a few months back, we brought only two potential buyers in to see the business. Both made offers. What my client didn’t know was that we got rid of over 65 “jackasses” in order to get that result.
This scenario has repeated itself several times this year, and in one instance we brought only ONE buyer in, but they were the RIGHT buyer. My team has affectionately coined this occurrence a “one and done.” It’s an occurrence that we plan on duplicating as many times as we can for our clients in the coming years. We aim to not only decrease the number of buyers we have to bring into a business, but the number of months from list to close. If you’re concerned about your legacy, your employees and the kind of buyer that takes over your business, we understand. We get it! While I can’t promise a “one and done,” I can promise that we’ll go after more than “low hanging fruit,” and do the work necessary to get the best result, if you have the patience to let us work through the process.
Accelerated Manufacturing Brokers, Inc., works to ensure the health and continuity of US Manufacturing by transitioning companies to the next generation of entrepreneurial business owners, one manufacturing company at a time.