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3 Strategic Considerations When Selling Your Manufacturing Business

As more and more manufacturing companies take advantage of the favorable market, one trend in particular could influence the way owners evaluate and choose a buyer for their company. As it turns out, the manufacturing sector has seen the highest growth of interest from one particular group—fellow CEOs.

Selling to another company, or “strategic buyer,” has long been an option for exiting owner-operators. The main motivation for these buyers is reflected in their moniker—unlike a private equity firm or other financial buyer, they look for acquisition targets that align with their core strategy, rather than other characteristics of a company, such as financial metrics.

With more parties coming to the table on any given deal, however, weighing the pros and cons of each is likely to consume much of a CEO’s time. With this in mind, we put together the top questions a CEO should ask when exploring a sale to a strategic buyer.

“One advantage of selling to a strategic buyer is the potential to obtain a higher sale price.”
  1. Can you command a higher sale price? One advantage of selling to a strategic buyer is the potential to obtain a higher sale price. Other corporations will often pay a premium for the synergies that make an acquired business a natural fit alongside their own.
  2. Do you want to preserve jobs? A higher price can come at a cost. Synergies often accompany redundancies between the two companies that may be eliminated during the merger or acquisition. Selling to a strategic may risk the jobs of employees in departments that overlap from company to company. In addition, the brand and identity they’ve worked to build may be absorbed by that of a competitor or larger organization.
  3. Are you ready for a “Second Act”? Before a sale, a CEO should determine how fast or slow they want to exit their company. A CEO who is looking to phase his work with the company out over time may not have that opportunity if the business is quickly rolled up into a larger company. Selling to a financial buyer instead may give a CEO a longer transition as they look for a new appropriate leader for the business and want to maintain operations. The day-to-day involvement a CEO wants to maintain post-sale and the timeframe he sets for a complete transition out of the company is a vital component of inking a deal.

The priorities of every CEO are different, and for any one deal, there may be more than one compelling option. Selling to another corporation, however, may be most ideal for business owners looking for a lucrative and immediate exit, where the future direction of the company and its employees is not the number one concern.


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