Previously, we shared some of the options owners have as they decide what should happen to their machine shop or fabrication business as they approach retirement. Common paths include transferring the business to a family member, selling to an employee stock ownership plan (ESOP), or selling to an outside buyer.
If you decide to sell your business to an outside buyer, it can be an excellent choice. After years or decades of building a company, a sale can provide a good financial outcome and a path into the next stage of life.
At the same time, selling a business is a detailed process. If you are considering selling your shop, here are some important factors to keep in mind.
One of the first decisions you will need to make is whether to handle the sale yourself or bring in a team of experienced advisors.
In our experience, it is always better to have advisors.
Many custom machining and fabrication shop owners are used to solving countless problems on their own, from quoting to equipment issues. Because of that, many are tempted to manage the sale process themselves, perhaps focusing on the possibility of eliminating fees.
The reality is that an experienced team can help you get more for your business. They’ll help you understand what it’s truly worth, how to present it properly to buyers, and how to avoid unnecessary delays. They can also allow you to stay focused on running the business while the sale process is taking place.
At a minimum, you’ll likely want an accountant, an attorney, and a business broker or small investment banking firm.
For your attorney in particular, we strongly recommend choosing someone with mergers and acquisitions experience. M&A work has its own language and risks. A lawyer who has been through these transactions before can help you understand the important details.
The same principle is important for the rest of your team, too. In some ways, it’s similar to other transactions like selling a house. We recommend you talk to multiple potential advisors to see who has the right track record and whose style fits yours. You want partners you find easy to work with.
As a business that has been through this process several times, we can offer insight into what buyers will want to know.
Buyers will conduct due diligence before completing a transaction. Every process is different, but most buyers will want to start by learning about some basic areas of the business. They may ask questions about your metal manufacturing shop, such as:
The process will go smoother if you’ve organized all the necessary information and documentation upfront. Buyers can use this information to understand the business clearly, and they can then evaluate the opportunity with greater confidence.
The right buyer can make a difference. Price is, of course, top of mind for most sellers. But it is not the only factor to consider.
An experienced buyer is more likely to understand the process and have the financial stability to close. Experienced buyers will also have a track record you can examine to help you understand what the transition may look like after the sale.
Many owners are concerned with that track record; after all, we understand you have spent years building a business and may care deeply about the future of your employees and reputation.
At ReNEW Manufacturing Solutions, we work to preserve the culture and reputation of the businesses we acquire while integrating them into our broader company. In many cases, family members or existing leaders remain involved during the transition to create continuity for employees and customers.
There is no one definite timeline for selling a machine shop or fabrication business. Depending on the situation, a transaction can close in as quickly as 60 days, or take closer to 9 months. But the process is usually smoothest when you prepare early and speak with buyers who understand manufacturing.
At ReNEW Manufacturing Solutions, we are always looking to expand our network with experienced machine shops and fabrication businesses. If you are considering selling your business, contact us to start a conversation.