Preparing a manufacturing business for sale is a large undertaking that can take several years to plan and execute. This makes finding the right buyer one of the utmost priorities in the selling process. The last thing you want, as the owner of a manufacturing business, is to close a sale with a buyer that insists on his own terms and stays closed to legitimate negotiation. Though asset sales are almost always favorable to the buyer and stock sales are generally favorable to the seller, as an example, a buyer that offers flexibility can leave both parties of the sale feeling better about the final deal.
A Buyer Should Never Underestimate Your Value
If you’ve done your due diligence in feeling out the market before actually going to market, it’s likely that you’ve already taken steps to maximize the value of your business. You’ve put together a strong management team, invested in new assets that make sense from market trends, and diversified your customer base. If you haven’t already, you’re probably going to execute a formal audit, valuation and prospectus of your business so that you and the buyer know precisely what your business brings to the table. If you’ve taken all the above steps, buyers — who will do much of their own due diligence — must respect the value of your business on paper, if nothing else. Finding the right buyer would then depend on your priorities.
For instance, perhaps you want to sell to a strategic buyer that sees your business as such a strong fit that they would pay a premium to acquire your business. Maybe your strong cash flows and market position have you thinking your business would be attractive to a financial buyer that’s looking for more short-term growth. Whatever the case, know what you have and prove that you have it. Make sure the value of your business can’t be underestimated.
Deal Flexibility is a Critical Trait of a Quality Buyer
There will be buyers that only see deals made in the fashion that they see fit. This way of thinking can be disguised if buyers offer more money for your business than others. However, the amount of money that a buyer attaches to a deal is not the end-all-be-all term — there are other factors to consider. You might want to retain some kind of stake in your business after the sale. You might want to take the cash from the sale and remove yourself from the business completely. You might want to keep a managerial role after conceding ownership. You might strongly prefer a stock sale and will only agree to an asset sale if the terms justify switching.
Your values might or might not align with a buyer, so finding a buyer that’s willing to negotiate terms that accommodate your values can’t be overstated. Of course, selling your business is a two-way process and concessions will need to be made to the buyer, too. A buyer might see your business as an entry path into a specific industry. They might see your business as a way to integrate vertically or horizontally in a supply chain. They might see high short-to-medium term growth potential. Whatever the case, know what you want and don’t compromise your values exclusively because a buyer offered more money upfront.
We’ve discussed cultural fit in the past, but you know your business better than any buyer — perhaps outside of employees or family — could ever understand. Your business isn’t simply a collection of numbers and assets, but it involves people. If you’ve built up a manufacturing business, you likely have strong relationships with many of the employees. While you, as the owner, must do what’s best for you in a business sense, finding a buyer with a great cultural fit will not only increase the chances of future success (and a better deal), but also ease the stress of transition that the sale of a business inevitably brings to employees. Finding a buyer that understands this will be worth your while.