If you’re thinking about selling your manufacturing business in the next year, you’re in a good position to make a deal. Manufacturing is a cornerstone of the American economy; it drives about 11.39% of the GDP and employs over 8.50% of the workforce. Consumers are increasingly interested in quality products made in the USA, so buyers know that a well-run company with a good product has a high chance of long-term success.
Here are some more reasons buyers want to explore manufacturing.
Buyers can enter a market or expand their business with lower entry costs. Most manufacturers prefer to expand through acquisition since starting up a company requires a large investment. Finding the space, equipment, inventory storage, and employees creates a large barrier to entry. It’s much easier and cost-effective to acquire a company that already has these assets in place.
Buyers look for companies they can turn around or optimize for profitability quickly. Even if your company could be considered a fixer-upper, buyers will still be interested. They look for ways they can gain economies of scale by consolidating functions like storage or office administration. They look for companies that, with an investment in technology or marketing, can quickly increase revenue. Or they’re looking for companies whose operations can be improved, making them more efficient and more profitable.
Buyers look for ways to integrate component manufacturers into their current company. They seek out companies that will allow them to own more of the supply chain, so they rely less on outside vendors. By purchasing a company, they can eliminate markups and control how much they pay for essential components. They can also ensure that the components meet all quality standards and specs.
Shifts in national policies, such as tariffs and trade agreements can also lead investors to look to acquire U.S.-based manufacturers to reduce risk and insure against rising costs. In fact, if you manufacture components of larger parts or products, a broker might look for motivated buyers by seeking out the companies who might be or become customers interested in acquisition.
According to the National Association of Manufacturers, about 90 percent of manufacturing concerns are run by (mostly) baby boomer founders who are ready to retire. The average age of a family-owned manufacturing company CEO was 52 (in 2021, the last data available). Only 30% of these businesses pass to a second generation, and just 12% make it to a third.
Savvy buyers know that these owners find selling an attractive option compared to long-term energy and resource investments. They understand the value of these legacy companies and how essential they (and the jobs they create) are to the communities where they’re located.
For all these reasons, manufacturing owners are positioned to make profitable deals. If I can help you understand the value of your company and develop a strategy for selling it, email me at Clark@mfgbusinessbroker.com.
