Want to Improve M&A Deal Value? Focus on Optimizing Manufacturing

Want to Improve M&A Deal Value? Focus on Optimizing Manufacturing

Want to Improve M&A Deal Value? Focus on Optimizing Manufacturing

Your manufacturing business is thriving, you’re proud of your legacy, and you want to retire knowing that the business is in good hands for years to come. It’s a common story, but finding the right buyer and minimizing disruption to the business and your loyal employees while you go through the process of selling can feel overwhelming.

It’s a big decision, but at NuVescor, we’ve worked with many business owners in your position, and one of the best pieces of advice we can give you is to focus now on optimizing your manufacturing to make your business as attractive and as stable as you can before entering the market.

Why Boosting Manufacturing Performance Matters in M&A

Let’s start at the beginning. Optimizing your manufacturing performance typically results in increased efficiency, reduced production costs, and improved profitability. A boost to your performance increases gross margins and releases cash. These factors can enhance the overall value of the business, making it more attractive to potential buyers and potentially leading to a higher sale price.

Here are some key steps to help you realize additional value and position your business for sale:

1. Prioritize Business Continuity

Mergers can be disruptive; it’s your job to minimize disruption to your customers and ensure that the merger ultimately provides additional value. You can help keep disruption to a minimum by fine-tuning your manufacturing processes to boost agility, responsiveness, and efficiency so that your operations can seamlessly absorb changes.

Proactive supply chain management, coupled with streamlined manufacturing, minimizes disruptions to product availability or delivery timelines. Your transition plan should also include getting plant certification and other regulatory requirements in place as early as possible.

2. Focus on Streamlining your Network Design

Plant rationalization can be a key value driver, significantly reducing fixed costs. Reviewing your current operating practices and strategy and comparing them to the deal’s goals can help you define an optimal manufacturing network and take strategic steps to achieve it. You’re looking for areas where you can enhance efficiency, agility, and overall performance while reducing redundancies, bottlenecks, and inefficiencies.

Key aspects of streamlining network design in manufacturing operations include:

  • Analyzing and redesigning the physical arrangement of machinery and workstations to minimize material movement, reduce production delays, and optimize workflow.
  • Establishing well-defined and streamlined workflows that minimize unnecessary steps, handoffs, and waiting times.
  • Introducing automation and integrating advanced technologies, such as IoT devices, sensors, and data analytics, to enhance real-time monitoring, data collection, and decision-making. This leads to improved quality control, predictive maintenance, and resource allocation.
  • Designing the network to accommodate changes in demand or production requirements. This includes creating modular production setups that can be easily reconfigured or expanded based on evolving needs.

Streamlining network design in manufacturing operations involves optimizing the entire operational ecosystem for higher efficiency, reduced costs, improved quality, and increased responsiveness. This approach will help your business adapt more effectively to changes, including those brought about by mergers and acquisitions. Note: Depending on your state, there may be funds available to help pay for some manufacturing improvements.

3. Efficiently Manage Changes to Manufacturing Sites

In the lead-up to a sale, closing, merging, or significantly altering manufacturing sites might be necessary to enhance the business’ overall value. This transition requires a careful execution plan, including options for relocating products and equipment, harmonizing operational changes, and ensuring employees know their roles.

To minimize disruption and maximize the attractiveness of manufacturing operations, executives need to identify constraints and think through product processes and capabilities, current and potential volumes, costs, labor, operational factors, and product mix.

4. Integrate Your Operating Model

Integrating your operating model means rethinking and adjusting how your business works to promote collaboration, sharpen the focus on customers, and maximize value. At the corporate level, you’ll focus on the degree of centralization, the extent of integration, and who fills which roles.

It’s also imperative to understand that changes may affect service and product quality. Be prepared to justify these tradeoffs and ensure wherever possible, you’re working to create more value and a better customer experience.

By optimizing your manufacturing processes, introducing automation, and thinking through your network design and operating model, you’re adding value to your business. You’re also helping ensure a seamless transition that safeguards your legacy and goals.

At NuVescor, we specialize in helping manufacturing business owners in the Midwest and beyond build the value of their companies as they prepare to exit.

Contact us to learn more about how we can help you make the best decision for you, your company, and your shareholders.

This article was originally published on May 3, 2021 and updated on August 29, 2023.


Download the PDF: Want to Improve M&A Deal Value? Focus on Optimizing Manufacturing



Preparing Your Manufacturing Supply Chain for M&A

Preparing Your Manufacturing Supply Chain for M&A

Preparing Your Manufacturing
Supply Chain for M&A

For manufacturing business owners approaching retirement, mergers and acquisitions (M&A) present a strategic opportunity to exit the business with as little disruption to operations and employees as possible. At NuVescor, we’ve helped countless business owners exit their companies while preserving their legacy and goals. In this blog, we’ll share some tips to help you prepare your supply chain for successful M&A activity.

What exactly is the supply chain?

The supply chain is the backbone of your manufacturing operations, the network of organizations, people, activities, information, and resources involved in creating and distributing your product or service. From the procurement of raw materials to the delivery of the final product to the end customer, the supply chain includes sourcing, manufacturing, warehousing, transportation, and customer service. Effective supply chain management is essential to the smooth flow of goods and services, optimized costs, minimized risks, and meeting customer demands.

Why prepare the supply chain for M&A?

Merging or acquiring a company often involves integrating two different supply chains. Without proper preparation, this integration can cause significant disruptions in the flow of goods and services. By preparing the supply chain in advance, you can identify potential bottlenecks and operational inefficiencies and address them proactively.

The benefits of preparing for M&A include:

  • Ensuring continuity – A well-prepared supply chain will facilitate a smoother transfer of ownership. By evaluating and addressing potential risks and vulnerabilities in the supply chain, business owners can minimize disruptions and maintain business continuity, safeguarding the company’s reputation and customer relationships.
  • Maximizing value – Prospective buyers or investors often assess the efficiency and reliability of the supply chain as a critical factor in determining the company’s value. A well-organized supply chain with robust processes and optimized logistics can increase competitiveness, attract potential buyers, and potentially lead to a higher valuation during negotiations.
  • Mitigating risk – By proactively preparing the supply chain for M&A, you can identify and address risks in advance. This can protect the company from unforeseen disruptions during the transition process.
  • Streamlining operations – Preparing the supply chain for M&A presents an opportunity to optimize operations and streamline processes. Enhancing overall efficiency contributes to cost savings and profitability, positioning the business as an attractive investment for potential buyers.

Strategies for M&A Preparation

It is essential to allocate sufficient time and resources to thoroughly prepare the supply chain, as it plays such a critical role in the overall success of the sale of your business. As you move into M&A and begin to prepare, consider these tactics:

  • Assess the current supply chain – Before embarking on an M&A journey, you need to have a comprehensive understanding of your existing supply chain. Identify your suppliers, production processes, inventory management practices, logistics, and distribution networks. This assessment will serve as the baseline against which you and your purchaser can compare and align the supply chains of merging entities.
  • Build your triage team – Set up a core team to prepare the supply chain. Include stakeholders from various sections who can provide valuable input on supply chain issues and respond quickly to unexpected events.
  • Develop or update your supplier database – An M&A supplier database should contain key supplier data such as annual spend, location, contacts, supply agreements, and agreement termination date. This will be useful during the sale, as it gives potential investors and purchasers real visibility into your supply chain.
  • Manage your supplier and vendor relationships – Supplier relationships are critical to a manufacturing supply chain. Communicate openly with your suppliers about any impending M&A and its potential impact on their operations.
  • Communicate with your employees – The success of M&A activities heavily depends on the people involved. Ensure open and transparent communication with your employees about the changes taking place. Engage them in the integration process and address any concerns they may have about job security, roles, and responsibilities as far as you can.

In the dynamic world of manufacturing, preparing your supply chain for mergers and acquisitions (M&A) is more than just a strategic move—it’s a pathway to ensuring a seamless transition that safeguards your legacy and goals. The supply chain isn’t just a series of steps; it’s the lifeline of your operations. By proactively addressing potential bottlenecks, streamlining operations, and nurturing relationships with suppliers and employees, you’re not just facilitating a change in ownership, you’re also nurturing your business’s future success.

At NuVescor, we specialize in helping manufacturing business owners in Western Michigan and the Midwest and beyond build the value of their companies as they prepare to exit. Contact us to learn more about how we can help you make the best decision for you, your company, and your shareholders.

Preparing Your Manufacturing Supply Chain for MA

Download the PDF: Preparing Your Manufacturing Supply Chain for M&A​

Create the Future You Want With Our Exit Checklist

Create the Future You Want With Our Exit Checklist

Create the Future You Want With Our Exit Checklist

Peace of Mind

Is your business ready to sell? And: are you ready? At Nuvescor we understand that life’s big transitions may feel overwhelming. Getting ready to sell your manufacturing business qualifies as one of those milestones. However, once you’ve prepared for it by accessing our expert guidance you can feel confident that you’re making the right decision for your future, your family, and your employees— and that feels good.

Don’t miss out on our webinar and whitepaper

If you’re thinking about selling your business, you’ll need more than financial assessments and market analysis. This kind of decision demands clarity and planning to realize your goals for the future. That’s why we’re offering you our free on-demand webinar, “The Exit Roadmap: Your Five-Step Plan to a Successful Manufacturing Business Exit.” You can also download our accompanying whitepaper, “Personal Action Plan”. We’ll guide you through the essential steps you can take to help ensure that all goes well.

Five Easy Steps

Can you plan a successful exit strategy for your manufacturing business in just five steps? Our answer: a resounding yes. Our webinar and our whitepaper will get you up-to-speed on what you’ll need to do to create a successful exit strategy. Here’s a summary of tips and takeaways from our proprietary five-step checklist:

• Shape your strategy by gaining clarity on why you are considering exiting (for example: are you bored, is it time to retire, has the market peaked, do you want to do something else like travel or launch a new business?) In the process you can explore options including whether you want to sell outright, re-capitalize, liquidate, or transfer to your kids.

• Align your exit type with your why to enable a smooth transition. For example, if you are bored, or if you have a health issue, it may make the most sense to liquidate rather than transfer your business to family.

• Figure out your number to set a realistic and achievable financial target. Learn how to differentiate between what your business may be worth vs. what you may need or want for retirement or whatever goal you envision achieving next (consultant?) And know how to calculate the net proceeds.

• Visualize the life you want post-exit— an often overlooked but essential reality check. (Consultant? Traveling grandpa? Organic gardener? Motivational speaker? Pickleball pro?)

• Pinpoint your spot on our exit matrix; a key step in crafting the most effective exit strategy for you and yours. For example: Do you want to stay on during the transition?

You will also learn about current M&A trends in the manufacturing industry so you can better understand how today’s landscape may impact your exit strategy.

The Future is Here

Don’t miss this valuable opportunity to realize the future you want by creating a well-thought-out, solid exit strategy that prepares you to take the appropriate action.

You may have questions and we’re here to help you find just the right answers. To create your plan for a successful, rewarding exit from your manufacturing business, view our free on-demand webinar and download our whitepaper today.

Here’s to your bright tomorrows.


Download the PDF: The Exit Checklist: Your Five-Step Plan to a Successful Business Exit

Selling Your Business in the Post-Pandemic Environment

Selling Your Business in the Post-Pandemic Environment

Selling Your Business in the Post-Pandemic Environment

NuVescor President Randy Rua highlights successful recovery strategies used by businesses after the events of 2020 and what to do if you need to sell your business but your financial performance hasn’t fully recovered.

1) Steps businesses have taken to recover from the events of 2020.
Businesses that recovered well after the pandemic were those that did not solely rely on PPP money to cover their losses but instead raised their prices and streamlined their costs. Companies that waited to raise their prices and/or cut expenses until after their PPP money ran out now have two years of poor financial performance and weak current financial performance, making it difficult to sell their business for a good price. Businesses that used PPP money for investments like equipment and expansion fared better than those that only used it to cover costs or losses. In summary, businesses that acted like they didn’t receive PPP money and made necessary adjustments to strengthen their financial health recovered better than those that did not.

2) The metrics used by buyers to determine your business value. Buyers are now focusing on comparing pre-COVID key metrics to current key metrics such as gross margin, labor cost percentage of sales, and year-over-year growth rate to understand how well the business has recovered. While EBITDA for the last three years remains important, buyers are now placing more emphasis on current performance and future projections due to the volatility of the past few years.

3) The recent downturn in financial performance has increased buyer demand for profitable companies. Due to the pandemic, half of the companies listed for sale are distressed or potential turnaround opportunities. Strong companies are now receiving a significant amount of attention from buyers since they are fewer in number.

4) How to address buyer concerns about recent financial performance. To sell a business that has poor financial performance, it is important to show buyers a clear path to improvement, such as increasing pricing, cutting costs, or investing in new equipment. If a buyer cannot see a way to improve financial performance through implementing improvements, they are unlikely to purchase the business. It is also essential to find a buyer with the necessary skills, resources, and abilities to make the necessary changes. Finding this buyer is crucial to selling your business if you don’t have strong financial performance.

5) The factors that potential buyers look at when evaluating a business have changed post-pandemic. Buyers used to be fixated on a company’s EBITDA performance over the last three years. However, due to the pandemic, they are now looking at a company’s current profitability, cost metrics, and market demand to understand its potential for improvement. For performing companies, buyers are looking at the EBITDA for the last twelve months as the primary factor to determine the company’s value.

In the current market, it is not necessary to wait until 2024 or 2025 to have three good years of numbers to sell. Due to the pandemic, there are fewer good businesses on the market, so if a company is currently performing well, it is recommended that they consider selling now.

Companies that are not doing well need to make changes quickly or find a partner that can help them. NuVescor can assist in selling to a buyer who can make the necessary changes to get back to solid financial performance. The market is volatile, and to transition a business successfully extensive research to determine value and find the right buyer match is crucial.

If you need help with selling your business, NuVescor can help. Click here to get in touch with us.

Taking Care of Employees After the Sale: A Case Study on How to Do it Right

Taking Care of Employees After the Sale: A Case Study on How to Do it Right

Taking Care of Employees After the Sale: A Case Study on How to Do it Right

When you’re thinking about selling your manufacturing business after many years building up a successful enterprise, it’s likely you have several goals in mind. Along with providing a solid financial future for your family, most manufacturing company founders want assurance their employees will be well taken care of after the sale closes. After all, if you’re like most private business owners, your workforce is like a second family to you!

When employees learn that their employer is being sold, it’s only natural they might feel anxious or worried. In fact, some business owners postpone selling the company because they’re concerned about what will happen to their valued employees and how they’ll respond to the news.

But selling to the right buyer—one that can accelerate the company’s growth, and ideally one that shares your values and vision—often opens the door to new opportunities for your current staff. The sale of IEQ Industries to Gallagher Fluid Seals provides an excellent case study on how employees can succeed and thrive under new ownership.

By taking a best practices approach, the buyer and seller together ensured a smooth transition for employees—helping to allay any fears and ensuring continuity for the business’s operations. These four approaches all played a role in a successful outcome.

1. Secure Key Leadership Continuity

Employees often find reassurance in knowing that some of the company’s key leaders are staying on board post-acquisition.

“There is comfort in the fact that my role is the same,” said Rich Garnaat, president and sales manager of IEQ. “My goal has always been to serve the owner and company in the best possible way, and I figured that mindset would come back to benefit me as well.”

Of course, it’s possible that some roles will change post-acquisition. But when key managers remain on board and display a genuine company-first mentality, it helps everyone else follow suit and adapt to the inevitable changes with less trepidation.

2. Communicate Openly and Thoughtfully

Garnaat believes transparent owner communication was a key component in alleviating employee stress about the sale of IEQ to Gallagher Fluid Seals.

“IEQ’s owner kept me informed and involved in the steps of selling the business,” he explained. “Talking about the potential sale wasn’t surprising or scary; it was a welcomed opportunity for me to help the owner get the business ready to sell.”

Garnaat believes it helped that he and the owner had a close personal relationship, based on trust. “That much early and open communication about selling may not make sense for another owner if the trust isn’t as strong,” he noted.

When you’re in the process of selling your manufacturing company, be sure you’re only confiding in key managers you’ve built a strong relationship with. Your close circle of confidants should only include people you trust not to disclose the information before you’re ready or leave the company in the midst of the negotiations and due diligence.

3. Choose Your Timing Wisely

    Deciding when to inform employees of a potential sale is just as critical as deciding who to confide in. If you share the news with a broad group of employees too early in the process, before the negotiations and due diligence are very far along, you could send some team members running for the door out of fear that their future is now uncertain. And since a small percentage of transactions never come to closure, you could end up losing valued employees for no good reason.

    It’s best to choose the timing of any communication wisely, to ensure your key managers stay on board throughout the successful completion of the sale and your entire staff stays focused on business as usual.

    4. Develop and Communicate a Transition Plan

    Once you’ve completed the negotiations and due diligence, it’s important for your team to understand what will and won’t change post-acquisition. Here again, your goal should be to ease any fears they may have about the upcoming transition.

    Garnaat recommends engaging in clear and open communication with all staff. “When things are finalized and you know this is going to be the buyer, it’s ideal to bring in the buyer and have an employee meeting or several meetings to map out what the process is going to look like after the sale,” he said.

    Ask the buyer to document a post-acquisition employee transition plan, with details on any planned changes to the organizational chart. This document can serve as your guide in having conversations with key employees about the transition. The better the buyer can paint and communicate the post-transition picture to the entire team, the more comfortable they will be going forward.

    Even if you don’t agree with every change the buyer plans post-sale, it’s critical that you take an active role in helping key members of your management team prepare for what’s to come, so they in turn can help the entire workforce feel good about the ownership change.   

    “Gallagher has been true to everything that was promised before the business sale closed,” Garnaat said. “Things have gone very smoothly and I’m incredibly pleased with the new ownership.”

    While selling the business you’ve poured your heart and soul into is never an easy decision, if you follow a proven process to find and engage the right buyer, plan well, and engage in timely, transparent communication, you’ll be assured your employees are in good hands. That’s why it’s critical to partner with an investment banker that understands what it takes to build and sell a manufacturing business successfully.

    For owners of manufacturing businesses in Michigan and across the country, that trusted partner is The NuVescor Group. We’re leaders in manufacturing mergers and acquisitions, helping founders find the right buyer, then guiding them through the process to achieve the optimal outcome, from start to finish. We have experience across the full spectrum of manufacturing business types, and we’ve successfully guided countless completed transactions.

    NuVescor is the investment bank that middle market manufacturing companies turn to sage advice required to maximize their value and support the transaction process every step of the way. If you’re thinking about selling your manufacturing business, schedule a call to learn how our manufacturing M&A experts can help you achieve the best possible outcome!



    Download the PDF: Taking Care of Employees After the Sale: A Case Study on How to Do it Right