Manufacturing M&A Rebounds Amidst Pandemic

Manufacturing M&A Rebounds Amidst Pandemic

by | Dec 3, 2020

Manufacturing M&A Rebounds
Amidst Pandemic

In the early weeks of the pandemic, many PE firms actually reported higher than normal deal volume. Perhaps dealmakers were trying to make it to the finish line before the economy tanked, or believed things would quickly rebound. Whatever explanation experts can devise, though, one thing is clear: the market tanked quickly after that. By the Summer, many manufacturing PE firms were seeing half of their usual deal volume. Toward the end of the year, though, firms are now reporting that things are returning to normal.

Deal experts say that those trying to sell in the manufacturing space right now fall roughly into one of four categories:

  • Owners hoping to exit manufacturing before COVID permanently alters the business.
  • Manufacturers who have seen a COVID-related bump in sales, and who hope to capitalize on that short-term gain.
  • Companies hoping to close a deal prior to the year’s end because of concerns about tax changes under a new administration.
  • The natural level of deals, including owners transitioning to retirement. This fourth category was mostly untouched by the pandemic.

 

Analysis from BizBuySell, which tracks national deals, transactions declined 51 percent year-to-year in April. By September, the figure was just 5 percent. Dealmakers are finding that there are ways to productively move forward. They may need to renegotiate exclusivity periods and adjust terms and conditions to offer more security to buyers. While many manufacturers will continue to experience a decline, some may come out as big winners. And there has not been a surge in sales because of COVID-related losses, which bodes well for the market as a whole.

Perhaps the most important thing for manufacturers to know is that, if they can weather the storm of COVID, it bodes well for their future. This survival may even make a business a more enticing future acquisition.

If you’re considering selling now, it’s important to seek expert input at this important crossroads. Staying in too long can definitely erode value—but if you’re panic-selling, buyers will know it, and that may produce a deal that offers less value to all parties. As with all other M&A transactions, pandemic selling is all about how well your business is doing, why you’re selling now, and what motivates the buyer to consider a purchase. If all of those factors align, it’s possible to walk away with a tidy profit.

Manufacturing M&A Rebounds Amidst Pandemic

The Most Common Mistakes Business Sellers Make

by | Nov 3, 2020

The Most Common Mistakes
Business Sellers Make

You’re a pro at running your business—at drumming up sales when you need to, at navigating the ups and downs of your industry, and keeping things running like a well-oiled machine. So you might think you’ll be equally adept at selling it. Most sellers have never sold a company before, and go into the process with many misconceptions that can erode value and ultimately tank the sale. Here are the most common mistakes—and how you can avoid them.

Not seeing things from the buyer’s perspective
Buyers don’t invest in businesses to enrich owners. They are investors, who want to grow the company and see handsome returns on their investment. Consider what information you would want to see if you were buying your business. What would you hope to do with the business? Then be prepared to answer buyers’ questions as quickly and comprehensively as possible.

Letting the business fall apart
Selling a business can be exhausting. Perhaps that’s why so many owners neglect their businesses during the sale process. Buyers don’t want to invest in your promises; they want to invest in the facts of your business. So if your business loses value, it’s a huge red flag. Investors are deeply risk-averse. Don’t activate their risk avoidance tendencies by letting the business fall apart.

Inadequate preparation
A sale isn’t something you can decide to undertake overnight. It requires lots of preparation. With enough time, there is plenty you can do to increase the value of your company. You’ll also need to get your books in order, prepare for due diligence, and increase your company’s curb appeal to the greatest possible extent. Disorganization and lack of preparation make your business look less well-run, and can deter buyers from giving it a second look. The right advisory team can lend professional credibility to the sale process while helping you prepare.

Unreasonable value expectations
You’ve poured a lot into your business. So for you, estimating value can be difficult—not to mention highly emotional. If you don’t know the value of your business or get so offended by value discussions that you walk away, you’ll kill the deal. Your business might not be as valuable as you hope it is. But being willing to take an honest look at key value drivers may help you generate additional value, especially if you plan the deal well ahead of time and work with a professional deal team.

A sale is a transaction that must generate value for both parties. Buyers want proof that your company is worth spending their money on, and they have no reason to take you at your word. So ultimately, avoiding seller mistakes means understanding what buyers want and finding ways to deliver this. For most companies, working with an M&A advisor can make the process easier, more transparent, and less stressful. Your advisor oversees the daily aspects of the deal, freeing your time and energy so you can remain focused on running the company.

Van’s Pattern acquired by LNS Manufacturing, Inc

Van’s Pattern acquired by LNS Manufacturing, Inc

by | Oct 27, 2020

Van’s Pattern acquired by
LNS Manufacturing, Inc

GRAND RAPIDS, MI, – NuVescor Group is pleased to announce the successful sale of Van’s Pattern, based in Grand Rapids, MI to LNS Manufacturing, Inc. owned and led by Larry DeHart and the Van’s Pattern current General Manager, Glenn McQuarter.

Van’s Pattern is a national leader and innovator in the manufacture of polystyrene patterns and prototypes.

DeHart said Van’s Pattern is an attractive opportunity because it’s been in business for 60 years, has a solid reputation in the industry, a mature workforce and is a pioneer in polystyrene pattern design and construction. The new owners have decades of manufacturing experience and Larry in particular has grown two companies, including Micro Machine Company, which he owned until 2010. Micro Machine, a precision Medical Device Manufacturer, had locations in Kalamazoo, Mich., and Warsaw, Ind.

“With 48 years of production management background, growing two companies as well as owning one of them, I feel comfortable in my abilities to continue the established reputation as well as promoting growth” said DeHart, now president of Van’s Pattern.

DeHart said he is “keenly aware of the challenges facing manufacturing today, especially in the contract manufacturing arena” and expects growth in the business. They are expecting to add 8 to 10 employees in 2021. The company currently employs 21 people.

Former Van’s Pattern owner Dan Vander Molen took over the company from his father more than 40 years ago, and prior to that worked closely with his father, learning all aspects of the business. He has seen the evolution of pattern making from the early wood patterns and recognized an opportunity to produce patterns using foam. Vander Molen was an early innovator and led the way in the industry in foam patterns. Van’s Pattern utilizes nine CNC-controlled cutting machines to meet the high-precision demands of the auto industry, special tool manufacturers and foundries.

About Van’s Pattern
The Company operates out of a modern 40,000 sq. ft. building at 11 Sweet St. NW, in Grand Rapids, Michigan. It has an excellent track record of serving industrial OEM and Tier 2 manufacturing clients as well as iron and steel foundries across the US. Its extensive facilities, best-in-class equipment and a highly-trained workforce rank it at the top of its industry.

About NuVescor Group
NuVescor Group, based in West Michigan, is a distinguished mergers & acquisitions service provider that partners with other professional service providers to provide the full array of disciplines needed to have successful and timely business transactions. NuVescor works within many different industries and has a strong focus and track record specifically in the manufacturing sector. NuVescor utilizes a proprietary proven process that greatly increases the success rates for business transactions as well as the customer experience. For additional information, please visit www.nuvescor.com.

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Van’s Pattern acquired by LNS Manufacturing, Inc

Concrete Manufacturing Business Sold to Area Contractor

by | Oct 24, 2020

Concrete Manufacturing Business Sold to Area Contractor

NuVescor Group is pleased to announce the successful sale of a concrete supply business to a longtime concrete contractor. NuVescor represented the seller in the transaction.

The buyer has been a trusted leader in the concrete industry for more than a half-century, providing concrete construction to a large group of customers.

The seller provides a wide range of concrete and related products including sand and stone aggregates and crushed concrete and serves as a one-source, efficient supplier of multiple products to contractors. Its high-quality products, developed through a focus on concrete technology, and emphasis on customer service produced a long history of repeat customers, growing sales and profitability. The Company’s owner was ready to retire, and the purchase provides the opportunity for the new owner to take over a successful, established operation.

The business was family owned and finding the right fit to continue the culture was a priority for the seller. Understanding the expectations of our clients and preparing them for the market resulted in a successful sale to the right buyer.

About NuVescor Group
NuVescor Group, based in West Michigan, is a distinguished mergers & acquisitions service provider that partners with other professional service providers to provide the full array of disciplines needed to have successful and timely business transactions. NuVescor has a strong focus and track record in the manufacturing sector. NuVescor utilizes a proprietary proven process that greatly increases the success rates for business transactions as well as the customer experience. For additional information, please visit www.nuvescor.com.

Manufacturing M&A Rebounds Amidst Pandemic

The Contemporary Business Exit: Keys to Success

by | Oct 15, 2020

The Contemporary Business Exit:
Keys to Success

Exiting a business now is different from doing so a few decades ago. Today’s owners must focus on some key drivers of success: financial recasting, team building, identifying intangible assets, and becoming more flexible about deal structure. In any world these increase the odds of a successful deal, but in the uncertain COVID landscape, these keys to success grow even more critical.

Financial Recasting
You must be mindful of recasting before you share your financials with anyone else. This approach is an accepted GAAP decision that enables you to remove from your financials any non-recurring, one-time company expenses such as family perks, purchasing because of fire or theft, and a vast range of other expenditures.

A newer term—earnings before interest, taxes, depreciation, amortization, and COVID (EBITDAC)–also figures prominently. You will need to show how your business was performing during the pandemic, as well as what you did to prevent major declines during COVID.

The Importance of Collaboration
Buyers want to purchase companies with quality management teams in place. If the owner makes most decisions, they’ll want hard evidence that someone else is prepared to take on that role. They’ll also want to see how agile your company was in the face of COVID. What changes did you make? Did you keep your team and the public safe, and find ways to innovate? If you can show the steps you took to survive and grow during the pandemic, your business becomes a much more enticing target.

The Intangibles
More so than ever before, you must focus on the value drivers that make your business special. Take a long, honest look at your company, and highlight what makes it successful. Because you are so close to your business, it can be difficult for you to even see the intangibles. And of course, each buyer’s assessment of those intangibles will vary. A professional exit planner can help you take the most objective look possible.

Flexibility
Flexibility affords you more opportunities to move closer to a successful sale. Too much flexibility can erode deal value, though, so you must work with an M&A advisor who can help you identify key terms. Buyers will absolutely be more aggressive than ever before as they seek out great deals in turbulent times. Too much flexibility leaves you vulnerable, but insufficient flexibility will usually mean buyers move onto the next target.

About NuVescor Mergers & Acquisitions
At NuVescor, we align the interests of investors and business owners to enable the personal and financial goals of our clients. For over a decade, we have helped founders and owners of companies in the manufacturing sectors achieve maximum value for their companies. Together, we can provide business valuations, financial analysis, investment guidance, and business transaction advice for middle-market companies with revenues from $5 million to $500 million.