Having worked in manufacturing M&A for more than 2 decades, I’ve learned that there is ONE critical skill required above all others if you’re selling a manufacturing company. This one skill is hard to come by in an M&A professional or manufacturing business broker. For Sellers, it’s a skill you should look for in any professional you hire. If they have this Most Critical Skill, a broker can cut the time it takes to sell in half…. or more. We recently went under contract to sell a manufacturing company in the Midwest, for which this skill changed the dynamic. However, it may not be what you think. It’s not an MBA or any other degree. It’s not years of sales training. It’s something so simple that you almost won’t believe how easy it is.
The Games People Play
Before we get to the most critical skill, let’s review some of the absolute B.S. that happens as quality manufacturing companies come to market. Having been in the M&A industry a while and cut my teeth in the manufacturing sectors, I feel like I’ve seen it all. My M&A colleagues will shout a hearty “Amen” as I describe the crap that comes out of the woodwork when a quality listing is taken to market. Here’s a look at some of the common scenarios:
- Donny No Down – Donny No Down is a buyer who has manufacturing experience and wants to be a business owner. However, he lacks an appropriate down payment for the business he wishes to buy. He thinks the Seller should kick in to help fund his ambitions, because as one such buyer told me, “it shouldn’t be all about money.” For my retiring client whose blood sweat and tears built the company and who was relying on the sale of the company to fund his retirement, it was all about that money. As it should be. If my client wished to fund a charity, it should be one of his choosing, not your under-capitalized ambitions.
- Strategic Sam – Strategic Sam comes in a few different incarnations. On one hand “Sam” might be a company that works in the same space as the client company. They’re hoping to expand geographically or simply acquire customers through acquisition. They’ve got the money to spend, but they’ll never close the deal because they can’t figure out what to do next if their life depended on it. There’s a different incarnation of Strategic Sam who knows exactly what to do next. However, the issue is that they do not want to buy everything you’re selling; they have their own facility, machine tools and staff. Strategic Sam simply wants your customer list. They enter the process like Sammy Savior, but they have no intention of spending anywhere near your asking price, because they don’t NEED everything.
- Nervous Nick – Nervous Nick is a buyer who has business experience and is financially qualified to buy your business. The issue here is a lack of spine. He’ll drag things out and ultimately won’t close the deal and may cause you to lose other good buyers by dragging you along for too long. However, at that end of the day, he dreams of making an acquisition, but Nervous Nick is way too chicken to close the deal.
- Enthusiastic Ed – Enthusiastic Ed might be one of the more dangerous in the bunch. He’s slick. He says all the right things and is complimentary about your business. Enthusiastic Ed will make you believe he’s the perfect buyer. So much so that you open your doors and allow him access that he should NOT have prior to making a substantial investment or acquiring the entire company. His goal is access and information that will allow him to steal the company without a gun. When he has what he needs, he will exit the process and either use the information to become a competitor OR use the information to gain a position with an incredibly large company in the same sector. He basically uses your company trade secrets to buy himself a job or an equity position with a much larger entity.
There are clearly more scenarios and names we use to identify them. But, you hopefully get the point that they are simply not the right buyer for your manufacturing business.
A Critical Skill When Selling a Manufacturing Company
Have you guessed what the most critical skill is when selling a manufacturing company, or any company for that matter? It’s crazy simple. You must get to “NO” faster. You need an M&A professional or business broker who can identify bull shit a mile away. You need an advocate who can get to “NO” with lightning speed. The faster you can identify those idiots who are wasting your time, the faster you can move on to a QUALITY BUYER. The truth is, the skill of getting to “NO” quicker comes with experience and the ability to read people and situations. If you’re choosing a representative to sell your manufacturing company, choose wisely! If your business broker can’t get to NO quicker, you might double the amount of time it takes to sell your manufacturing company. Don’t let that happen to you!