Industrial Distributor Seeking Exit Strategy
Are you the owner of an Industrial Distributor and nearing retirement — but without a succession plan or exit strategy? Automation Distribution is actively looking to acquire Industrial Distributors with synergistic product lines and skilled sales teams. If interested, please fill out the form below to start the process.
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If you are seeking an exit strategy for a manufacturing company by merger or acquisition, please complete the form above. Your information will be sent directly to our leadership team.
There are a few crucial factors to take into account if you're thinking about selling your manufacturing or industrial parts distribution company. Some factors apply to selling any kind of firm, while others are unique to selling a manufacturing company (especially given the current economic context). Before the COVID-19 epidemic, the manufacturing sector had just begun to pick up steam. Although it is starting to regain its footing, the sector will undoubtedly continue to face a constantly shifting environment. We have identified the following crucial factors to take into account when selling a manufacturing firm based on decades of experience purchasing and selling businesses in a variety of industries.
Valuation & Asking Price
Before listing your company, you should, however, ask a few questions. How much do you sell each month and annually? How much money do you bring in, and what proportion of it is profit? What growth do you anticipate? How effective are your internal procedures? Can the company function without you as the leader? How do you do in comparison to your rivals? Is the present business environment advantageous for you? Your production capacity, supply chain efficiency, ability to predict demand, use of technology, working capital management, location, customer base, level of competition, and market circumstances are just a few factors that will affect the value of your manufacturing company.
The first and one of the most important phases in selling a manufacturing firm is having a precise grasp of its worth. A flawed sense of value means you're either losing money or charging too much and turning away great customers. Each manufacturing firm is different, and a variety of factors influence value.
You must have a fair and accurate assessment of the worth of your manufacturing firm for a variety of reasons, but selling your business requires a professional business appraisal more than any other time. The single most valuable piece of financial data about any firm is a valuation document, therefore it calls for a precise and thorough methodology. In order to properly value your manufacturing company, you might need to:
- Past three years Returns on Federal Taxes
- Balance sheets and the last three years' P&L (profit and loss) statements
- Balance sheet and year-to-date comparison with the same time last year are included in the interim profit and loss statement (P&L)
- The average cost of the sellable goods in stock at any given period during the year
- Equipment List Copies of real estate tax bills, if real estate is allowed to be sold together with the equipment
- A copy of any accessible real estate appraisal
- Leasing details
Large strategic purchasers in related or complementary sectors, as well as private equity firms, are always included in the target market for the sale of manufacturing businesses. However, despite being more difficult to approach, there is another important customer type that should never be disregarded.
Get Financial Records in Order
Interested purchasers will want to see your financial and operational/production records. Maintain their organization and timeliness. To make your finances easier for purchasers to understand, organize your taxes, credit history, and other financial documents. Verify the accuracy, completeness, and timeliness of all manufacturing reports, daily quotas, scrap records, work-in-progress reporting, and other documents.
Additionally, make an effort to settle any high-interest debt you may have before the sale. Before presenting your accounts to potential purchasers, consult with a professional to standardize your bookkeeping system if it is not the industry norm. You definitely don't want to offer confusing financial reports that nobody can understand. Clear financial records reveal a lot about your business practices.
You should anticipate requests for thorough explanations or proof of what you do and how you run your firm from prospective purchasers. This type of customer request might catch you off guard if you are not well prepared to respond to it, especially if what you do is complex and hard to clearly describe.
Having a step-by-step manual or having your procedures documented can help the new owner understand how to operate the firm. In manufacturing, process documentation is crucial, particularly if your work is multifaceted. Giving specific operating instructions to potential purchasers can reassure them that they will be able to run the company after you leave.
Ensure Legal Compliance Requirements
Smart purchasers will not only check to see that your facility complies with state or local health, safety, and environmental requirements, but they will also check to see that it will continue to do so once the sale is complete. Compliance with environmental laws is more important than ever in the industrial sector. It is in the best interests of purchasers to make sure they are purchasing an ecologically friendly and sustainable firm given the ecology movement and increasingly environmentally aware consumers.
Given this tendency, you need to adopt a more proactive stance to get the most out of your company. And that entails employing eco-friendly products in your production and staying current with continuously changing standards. Customers that care about the environment will also ask to see your certification or records of compliance, especially those related to toxic waste removal. Maintain a safe workplace for your staff and, if required, seek OSHA certification. All of them will significantly increase the worth of your business.
When is the ideal time to sell a manufacturing company?
Simply said, when your manufacturing company is operating well is the perfect moment to sell it. Any firm may benefit from this, even if that may seem counter-intuitive. It is common to believe that if you wait a little bit longer, you may receive even more for your organization if your manufacturing industry is heading up. Sadly, we have observed that this justification has led to a lot of sellers we know having regrets. These business owners frequently experienced an unanticipated event, such as a change in their health, the loss of a significant customer, or a bad turn in the economy.
We comprehend the pain and annoyance that accompany this kind of circumstance, particularly following years of investing blood, sweat, and tears into a corporation. A discreet, expert business appraisal offers crucial data that aids in determining when is the optimum moment to sell a firm. This year has served as a constant reminder for us all that we are blind to what is ahead. Therefore, we must concentrate on what we do know, and the strongest indicator of the direction your manufacturing company is headed is financial data. The right timing is essential; you don't want to look back and regret not acting sooner. Contact us today to schedule a confidential appointment or complete the form above to discuss your options directly with our leadership team.
Sources: https://acceleratedmfgbrokers.com/12-steps-to-selling-a-manufacturing-company/; https://acceleratedmfgbrokers.com/business-valuation-manufacturing-company-worth/; https://raincatcher.com/selling-a-manufacturing-business; https://www.vikingmergers.com/blog/2020/selling-a-manufacturing-businesss-5-things-to-consider/;
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