The Top 5 Ways To Beat The Competition When Buying A Manufacturing Company

buying a manufacturing company
⏱ Reading Time: 3 minutes

Increasingly within the manufacturing sector, there are multiple buyers for every company on the market.

As a smart manufacturer, you are seeking to accelerate the growth process through acquisition.

Consider these top five ways to beat the competition when buying a manufacturing company.

Right now manufacturers have choices and unless you do the following, they might be choosing someone other than you!

Consider these 5 ways to beat the competition when buying a manufacturing company:

#1 - Ability to Close the Deal

When buying a manufacturing company, demonstrate your financial ability to close the deal.  Show a willingness to do it quickly without unneeded delays.

Buyers are often reluctant to demonstrate their financial ability to close a transaction.  Some think that their net worth might give the broker or Seller ammunition to ask for a higher price.

The truth is that your net worth does not change the value of the Seller’s business. It is what it is.

Your lack of transparency, however, may leave doubt in the Seller’s mind that you can really close the transaction. He may opt for your competitor who was more forthcoming with the “how” and “when” of closing the deal.

#2 - Seller’s Role

Before the deal is closed, determine what the Seller’s role will be.

Most are selling because they are of retirement age. They will need and want some needed downtime.

While transitional periods are common, it’s inappropriate for a Buyer to request the Seller jump through hoops building the business.

If the Seller wanted to spend that much time breaking into new markets, he would have done it himself.  The seller then would have received the benefit of increased growth and a much higher sale price.

Keep your post-closing work requirements for the Seller reasonable.

#3 - Be Transparent

Display your industry knowledge and your plan for growing the company. The reasons for this are two-fold.

First, most Sellers want to know that the company they spent a lifetime building will survive them.

Also, sellers want to be sure the company is not buried by some inexperienced buyer that doesn’t know how to run a manufacturing company.

Second, if there is any Seller financing involved, the Seller’s ability to actually collect his money will be connected to how well you do with the business.

If you have skills – you’ll be better positioned against the competition if the Seller accurately understands what they are.

#4 - Be Respectful

When buying a manufacturing company, treat the Seller's employees and professional advisors with respect.

Many manufacturers have had their teams in place for decades. A rude moment with the corporate accountant or key employee can be enough to blow the deal when there’s competition.

Employees you dislike can be replaced when the deal is done, but first GET the deal.

#5 - Sweeten the Deal

Add a commission for new business gained from existing customers.

This is one of my favorite strategies. If the acquiring company has a lot more production capability than the selling company, it is likely that they’ll be able to get more work from existing customers.

When you’re in tight competition with other buyers, offer the seller a percentage of all new work you’re able to get from his customer for a defined period of time.

If the Seller operates in a 15,000 square foot facility and you’re in 60,000 with much more modern equipment, this will appeal to him.

It might also be the last nail that closes the coffin of your competitor.

Do you have something, in particular, you’d like to learn about?  

Please comment below with your suggestions.  

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