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

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

by | Aug 29, 2023

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.

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Read next: Preparing Your Manufacturing Supply Chain for M&A

Preparing Your Manufacturing Supply Chain for M&A

Preparing Your Manufacturing Supply Chain for M&A

by | Aug 1, 2023

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

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Read next: Create the Future You Want With Our Exit Checklist Guide

11 Questions to Ask When Selecting an M&A Firm

11 Questions to Ask When Selecting an M&A Firm

by | Dec 21, 2022

11 Questions to Ask When Selecting an M&A Firm

How do you know if you can trust the M&A firm you plan to hire? Have them continually give you proof and do not just take them at their word when they say “You can trust us.”

Determine the M&A Firm’s ability to prove with data they can meet your goals before committing

1. When in the process will you know if they can meet your minimum threshold of value from the type of buyer you want to sell to?

2. When will you know if the firm can create the needed buyer pool confidentially, efficiently, and in a timely manner in order to receive multiple proposals?

3. Can you easily get out of their engagement agreement if they cannot meet your goals?

Prove with a documented transparent process the M&A Firm’s ability to put in the effort required

4. Who is involved in their M&A process and do they have the skills and capacity to do what is needed?

5. How much of your time does the firm need to run their process? Will you be distracted from running the business?

6. Will the firm do the extra work to give you all the data needed to make sure you select the right buyer?

7. How will you know if the firm is doing what they told you they would do? How is each team member held accountable?

8. Can you fire them at any time if needed?

Ensure the M&A Firm’s fee structure and team member compensation align with your success

9. Is the person or persons working for you incentivized to put in the extra effort?

10. Does the compensation plan allow them to work well together as a team?

11. Does the fee the firm receives incentivize them to maximize your value?

Establishing a process to effectively compare firms is how you will find the most suitable fit and ensure the process runs as smoothly as possible. Finding an M&A firm that aligns with you and your business is what’s most important in your sale or acquisition.

The NuVescor Group is here to fully assist in handling the sale or acquisition of your business. Contact us today to learn more about how we can help!

Strategies for Successful Manufacturing M&A

Strategies for Successful Manufacturing M&A

by | Mar 2, 2022

As M&A in manufacturing heats up, rising interest rates and inflation serve to reduce the potential value of these mergers, especially without good planning. A thoughtful strategy can help generate value via M&A. Here are some critical tips to keep in mind.

Start Early and Plan Ahead

A merger demands time and expertise, and the more of both you have, the better positioned you will be to manage problems as they arise. Bring in the right teams early to prepare for the sale as well as the post-sale integration. Intelligent dealmakers are constantly re-evaluating ways to fast-track the realization of the promised deal synergies.

Optimize Digital Opportunities

Keep an eye on potential automation and digital opportunities that could boost transaction efficiency. One recent McKinsey report suggests that reducing the costs of traditional legacy systems may offer about a 2% boos tin value. Adding additional digital and analytics technologies to boost efficiency may generate savings as high as 4-5%.

Identify and Address Staffing Implications Early

Workforce implications to a deal should not be an afterthought. You must focus on strategies for retaining talent, even when doing so increases costs. Contract talent increases integration risks. It’s better to spend a little more upfront on retaining key talent. Consider it an investment in the future of the new entity.

Adapt to the Needs of the Business

Too often, dealmakers attempt to adapt the business to the needs of the deal rather than the other way around. Your targets should be tailored to the needs of the business. Develop specific benchmarks for measuring success, and continue to adapt these benchmarks based on real-world data.

Simplify Technological Complexities

Manufacturing mergers often trigger significant and complex technological challenges. These strategies can help simplify:

  • Nurture a flexible data and transaction architecture.
  • Leverage proven integration patterns rather than trying to invent your own.
  • Cloud-first always. Cloud-based technologies save time, money, and frustration.
  • Create a standalone mirror copy to test new technology before attempting to fully transition or integrate.

In an uncertain world, intelligent planning is critical to the success of manufacturing M&A. Your plan must be well-planned, well-executed, and fully informed by the realities of your niche. Expert insight can help you ensure your deal is prepared to meet the challenges of the post-pandemic world, and protected against the looming specters of inflation, rising interest rates, and a pandemic backslide.

Using M&A to Revive a Failing Manufacturing Company: What to Know

Using M&A to Revive a Failing Manufacturing Company: What to Know

by | Mar 2, 2022

The early stages of the COVID-19 pandemic and a supply chain crisis brought M&A manufacturing to a near-standstill. But now, manufacturers are back up and running, and many are looking to M&A as a way to grow their businesses, exit into retirement, and earn a tidy profit. But manufacturing M&A isn’t just for thriving businesses. If your manufacturing company is struggling, M&A might be a way out. Here’s what you need to know.

M&A as an Exit Plan for Struggling Businesses

If you’re wondering how you can use M&A to your advantage when you exit, there are a few options. They include:

  • Selling your company outright, often at a fraction of its potential value.
  • Buying another company to supplement your offerings and help your business recover.
  • Selling off a struggling portion of your company so you can focus on more profitable elements.
  • Liquidating assets and selling them.

Is Now the Right Time?

If you’re contemplating a sale, now is actually always going to be the lowest risk time to sell. Why? Because you know where you stand right now. Moreover, interest rates are likely to increase and multiples may decrease, making your business less sellable in the future than it is right now. Even if you increase value, if your multiple plummets, the real-world meaning of that value will, too. So if you know you want to leave your company, the time to make your exit is now. Working with an M&A advisor to help plan your exit can help you extract the most value, even when your company is struggling.

Exhausting Other Options

If you’re leaving solely because your company is struggling, it’s important to consider exhausting all other options first. Can you bring in new management? Raise capital? Invest more time and energy into the company?

Buyers are inherently risk averse, especially in the wake of COVID. They don’t want to buy a struggling company, especially not for a premium price. And if they hear you’re walking away because you don’t know what else to do, this is a major deterrent. So before oyu put your company on the market, you must be absolutely certain this plan is best for you.

Get a Valuation

When you prepare to walk away, work with a valuation expert. Knowing the actual value of your company can help prevent unpleasant surprises, and may even help you generate additional value if you have a little time. Some owners of struggling businesses skip this step, but that’s a decision that is to their detriment. Knowledge is always power, even when the information isn’t exactly as positive as you would like.