Selling a manufacturing company takes roughly a year from listing to closing. However, that’s not the entire story. Here’s why you should plan early.
Preparing a Manufacturing Business for Market When Selling a Manufacturing Company
Properly “packaging” a manufacturing company for sale is a voluminous task that takes time. Details about the company have to be presented in a way that confidentiality is maintained, while still providing qualified potential buyers with enough information to make an informed decision.
A typical “pitch book,” can be 30-100 pages and include information not only about the company being sold, but their overall sector including the future economic outlook for the industry and an analysis of the company’s position in the marketplace as well as their competitors.
The Valuation Process
When selling a manufacturing company or any company, before a pitch book can be prepared, a valuation of the company must be done to determine the appropriate list price.
This typically includes a review of:
- Three years of tax returns
- Three years of financial statements
- Equipment and inventory
- Analysis of customer and sector concentration
- Company’s operations and sales procedures
- A SWOT analysis
Seller’s Time Required Post Closing
Sellers are usually contractually obligated to remain with an acquiring entity for a period of time post-closing. The length of time can be affected by the following criteria:
- How complicated the manufacturing process is?
- The company’s degree of dependency on the owner.
- Whether the company has documented SOPs.
- Are there knowledgeable department heads?
- If the acquisition lender has any internal requirements for the Seller’s involvement.
Selling a Manufacturing Company Requires Planning
Typically, buyers will look for a seller to remain six months to a year with the company. According to recent statistics published in the Market Pulse Report, which tracks the M&A industry nationally, most sellers are not properly planning for the sale of their businesses. They are waiting until they’re ready to “be done,” not realizing how long the process takes.
Depending on the level of organization in your financial documents and other company data, the process can take anywhere from 1 to 2-1/2 years. Companies whose founders plan ahead tend to sell at higher multiples. Companies whose owners are approaching the process with work fatigue don’t fair as well.
If you are considering selling a manufacturing company and you’d like to learn more about what it takes to prepare your manufacturing company for sale, download our free guide.