This case study highlights the success of a business owner selling a metal fabrication business. Our team at Walden facilitated the transaction. If you’re a business owner preparing to sell a manufacturing business, you can gain useful insights from this M&A analysis.
About the Metal Fabrication Business
Our client owned a company that manufactured fabricated metal, creating heavy-duty steel used in the balconies, railings, and stairwells of commercial buildings.
The owner was a graduate of Georgia Tech and had spent most of his career in engineering before purchasing the metal fabrication business. After nearly a decade of running and growing the company, the owner decided to sell the business and retire; a grandchild had entered the picture, so he wanted to spend more time with his family.
This transaction was special to our team. We had already worked with the buyer on a previous transaction a few years prior. Pleased with his experience working with our team, the owner approached us again to prepare his metal fabrication business for sale.
Case Study: How To Sell Your Manufacturing Business
Preparing to Sell
There are several factors in the M&A process that can significantly influence the outcome:
- Speed: Faster transactions usually result in more favorable outcomes. The longer it takes to close a deal, the greater the likelihood that one party will get cold feet and walk away from the deal.
- Financial Accuracy: It’s important business owners do not overvalue or undervalue their company and make sure the price point is supported by the company’s financials; this streamlines negotiations and helps sellers find the ideal buyer.
- Target Buyer: Finding a buyer who understands the industry and shares the same values as the seller is essential for closing a deal.
Before a buyer enters the transaction, business owners need to do adequate preparation to ensure these factors will work in their favor.
Sara Burden, a Walden principal, helped the owner prepare his metal fabrication business for sale.
“The seller wasn’t sure of his value. After making a preliminary review of financial information, it was clear that the business had enough volume and clout to likely be acquired by a strategic buyer. With this in mind, I recommended he have his financial records audited for the prior two years. As a result of the audit, the initial market valuation was supported and we went to market knowing we could justify our value.”
–Sara Burden, Principal, Walden
Most business owners use third-party accounting firms to audit their financial records. Not every business owner has those contacts, but Walden can connect business owners with a network of advisors; i.e., accountants, lawyers, wealth managers, and bankers.
“We have a resource database we can draw upon depending on the needs of the client. It’s vital for business owners to use these resources. We prefer entering the market with audited statements so we can expedite the transaction and put the client in a stronger negotiating position.”
–Sara Burden, Principal, Walden
Finding a Buyer
Walden looked for a buyer who:
- Had sufficient financial backing to meet the owner’s price point
- Shared the owner’s values on employee and customer satisfaction
The owner was eager to retire, but he felt a duty to protect his employees and ensure his clients continued to enjoy the high quality products and services under new ownership.
We quickly found an ideal buyer, a private equity owned company in the aluminum fabrication business based in Florida. They made a full-price offer on the metal fabrication business.
The buyer was also a strong cultural fit.
“The buyer had a very similar corporate culture and was both employee-conscious and customer-conscious. They believed in selling quality products and didn’t over-promise on delivery and installation timeframes. Our client and the buyer hit it off immediately. It set the tone for the entire process, which went smoothly.”
–Sara Burden, Principal, Walden
Walden arranged a meeting between the two parties and a tour of the manufacturing plant. Then an offer was made and accepted and due diligence began.
Related Article: M&A Tax Implications of Selling Your Business
Due Diligence
During the due diligence phase, the buyer will conduct their own audit of the company’s financial records and business operations to make sure the price point is supported by the company’s income, assets, and projected growth. Buyers typically look for problems or discrepancies that could impact the company’s financial performance, which often results in a lower price point.
“Due diligence is always going to be painful for the seller. Every aspect of the business will be scrutinized: inventories, equipment, legal records, human resources, etc. The buyer is not only looking at the performance of the company, but also the quality of the earnings, customer base, employees, and management team. I liken it to someone opening your lingerie drawer and going through it because that’s how invasive it can feel.”
–Sara Burden, Principal, Walden
Due diligence is usually a stressful process for the seller, but Walden made sure the owner of the metal fabrication business was extremely well-prepared.
“The seller was meticulous in his record-keeping and business operations. He managed to get through all the auditor’s questions and came out smelling like a rose.”
–Sara Burden, Principal, Walden
Closing the Deal
To manage the process and keep it moving swiftly, Walden arranged weekly calls between the buyer and seller to ensure documents were being exchanged in a timely manner and due diligence kept moving.
“At Walden, we established processes years ago that help us get everyone to the closing table. First, we have both parties set up their ‘deal team’ of bankers, financial advisors, and points of contact. Then, we set up weekly accountability calls so everybody knows where we are in the process. Who needs to provide a document or execute a task? What needs to be done before we move on to the next step? We take copious notes at these meetings and review them every week.”
–Sara Burden, Principal, Walden
The Result
With extensive preparation, a suitable buyer, and a streamlined negotiation process, the owner of the metal fabrication company managed to close the deal within 6 months.
“Transactions often take a year or more to close. It’s very unusual that this deal closed in just half a year. It was a beautiful outcome for both parties.”
–Sara Burden, Principal, Walden
Our client happily entered retirement with more than enough profit to properly spoil his grandchildren.
Takeaways: Metal Fabrication M&A
There were many factors that contributed to the successful outcome, but one of the most important takeaways is the business owner kept organized and meticulous records, and had curated a very effective staff with streamlined business operations.
Not every business owner is quite so prepared for the M&A process, but Walden can help.
Walden’s team of M&A advisors can provide guidance and strategic planning to put your business in the best position for a sale, even if you’re not ready to enter the market. In fact, many business owners begin working with Walden one or two years before selling.
“You should seek an M&A advisor as soon as you start thinking about selling your business. We encourage business owners to reach out to us and meet our team, and there’s no pressure to begin the process right away. We can offer you insights on how to prepare your business over the coming months and years so when you’re ready to sell, you’ll be in a strategically advantageous position.”
–Sara Burden, Principal, Walden
About Walden
Walden is a mergers and acquisitions firm that provides business owners with the guidance, resources, and connections needed to successfully sell their company. The firm is owned and operated by former business owners who have first-hand experience selling their companies. Their team of M&A experts is committed to making sure the sale meets the personal and financial objectives of the business owner.
