Selling a Manufacturing Company in Washington

Sep 27, 2017

The Seattle Seahawks, University of Washington, and Washington State University are all blessed this autumn to have knowledgeable & experienced head coaches and experienced & highly skilled quarterbacks.  Field success is anticipated for each team this year because the right personnel is in place to execute the proper strategy at the correct time.   Success in the sale of a manufacturing business is also contingent on having the right personnel in place to execute the proper strategy at the correct time. 

Achieving the sale of a manufacturing company at the best possible market value in a timely manner is a sophisticated process that requires a business broker with significant knowledge, experience, and negotiation/facilitation skill.   The sale of a manufacturing company is not a job for a business brokerage generalist or firm that has completed less than 25 transactions in the manufacturing industry sector if best practices & results are desired.  The job should be delegated to a company with comprehensive knowledge of market conditions and the unique transactional elements associated with deals in the manufacturing industry sector.  IBA has been the premier business brokerage firm representing owners in the sale of manufacturing companies in the Pacific Northwest since 1975.   Our manufacturing sector representation projects in 2017 have ranged from aerospace and construction to electronic components and food production to printing and proprietary marine & transportation products.  We welcome the opportunity to serve as a resource for information & strategy regarding selling a manufacturing company whether a sale is desired in 2017 or 2020.  The following is an introduction to some of the skills & services offered by IBA to its clients selling manufacturing businesses:

Business Valuation   – The first step in the sale of a manufacturing business is to determine the value to offer it in the marketplace.  Business valuation is subjective science that requires the expertise of a mergers & acquisitions professional that understands the accounting models commonly employed to value privately held companies; the market environment for similar companies in the relevant geographic area; and the financing conditions that exist to support acquisitions in the manufacturing sector.   All three of these factors are critical components to properly valuing a business for sale.  Entrepreneurs are cautioned against having a party value or represent a business for sale that is not active in the business brokerage marketplace for manufacturing businesses, as lack of knowledge of recently completed transactions, the market conditions created by buyer demand, and acquisition financing availability can result in a business being improperly valued.   An improperly valued business   traditionally sells at a lower price with a longer time period of exposure on the market.    Neither of these outcomes are good for an entrepreneur desiring to sell or the company being sold.

Business owners should also be wary of firms that either outsource their business valuations or take businesses to market without an established value.   The best business brokerage firms have the knowledge, experience, and ability to value businesses “in house”.  A business value needs to be justified & persuasively sold by a business broker to the buyer, their CPA or CFO, their attorney, and bank and/or investors to successfully complete a transaction.   A business broker that does not understand the sophisticated intricacies of how & why a specific value was assigned to a specific business will be at a disadvantage when selling the manufacturing company and fail to close potential buyers.

A school of thought also exists in the business brokerage community where businesses are sold in an auction environment without assigning a price to the business.  In theory, this can sound attractive to a seller, however it has been our experience at IBA during our 42 years selling privately held companies that this strategy results in lower prices in the marketplace than a value that is established and justified by a knowledgeable mergers & acquisitions professional.  The reality of this situation is the business is going to be professionally valued by buyers. No buyer is going to make a first offer at the high end of a valuation range.  Negotiations are going to occur between knowledgeable, professionally represented individuals.   Competitive market conditions will always increase the value of a business being sold. The question a seller should ask is do they want to establish the market or passively allow it to be established by a buyer that has a vested interest in buying the business at the lowest possible price.

Professional Sales – The successful sale of any product or service requires a presentation that articulates the attributes & benefits of the item to a potential buyer.  Professional representation of a manufacturing business requires an individual that can convey the unique attributes of the business, financial history, market niche, and future opportunities presented by the company.  If this cannot be accomplished, the company will not sell or will sell at a value reflective of the amount of information conveyed.  It is recommended prior to selecting representation that business owners have the party convey to them an overview of their business model and competitive advantages of their business to assess the level of knowledge and sales skills of the individual.    It is also important to select a broker that has successfully completed transactions involving manufacturing businesses and has ongoing engagement with the different demographic groups of buyers interested in acquiring companies in the manufacturing sector.   A few of the demographic groups currently acquiring companies in the manufacturing sector include companies increasing market share in an existing niche; companies bringing manufactured components in house to control production schedules and supply;  companies desiring to increase domestic production due to political & economic trends and environments; private equity firms,  non-profit corporations; and individuals with relevant experience desiring entrepreneurial investment opportunities for direct management.  IBA interacts on a regular basis with all of these buyer demographic groups and maintains a database of buyers actively seeking acquisitions in the manufacturing sector in the Pacific Northwest. It is common for multiple offers to be generated in a short time frame for IBA clients from this database in the manufacturing sector.  Many of the buyers in IBA’s buyer database are only actively engaged in the mergers & acquisitions marketplace in the Pacific Northwest with IBA based on IBA’s reputation for confidentiality, integrity, and “best practices” in facilitating the sale of a privately held companies.

Experience –   The  probability of achieving the successful sale of a business is enhanced with the engagement of experienced representation to value, market, sell, negotiate, and facilitate the transaction process.  There is no substitution for knowledge & experience.   Business brokerage is a business best learned by a “baptism by fire”.  No business owner wants to be the “guinea pig” for a business broker to gain the experience necessary to be successful in one of the most sophisticated sales professions in the business world.   All  business owners want to employ a firm that has the ability for their broker to reference prior transactions, negotiations, and conversations with attorneys & accountants during the sale process.

A business broker selling a manufacturing company serves as both a coach & quarterback for their client.   Pete Carroll & Russell Wilson brought Seattle their first Super Bowl trophy and failed to score the winning touchdown in a second.   I guarantee they are both better prepared to achieve results in a Super Bowl today than they were in the past.   The sale of their business is the final game of the season for an entrepreneur.   The results when they are posted on the final scoreboard are permanent.   We would welcome the opportunity to demonstrate for owners of manufacturing companies what IBA can achieve in the sale of your business.  We are confident that our knowledge, experience, and skill will get the ball into the end zone from the 1-yard line and secure the victory.  Putting our money where our mouth is, 100% of IBA’s compensation is tied to the successful completion of the sale of our client’s business.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.