The Ultimate Guide To Help Exit an Industrial Product Company
Considering an exit strategy from your lower middle-market industrial product company in California can be overwhelming. Without a proper, well prepared, exit plan, and an intermediary or professional business M&A Advisor to facilitate the process, there is no way to guarantee that you made the right decision.
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Guide to Help Exit an Industrial Products Company
Everything you need, all in this business exit strategy planning guide
Exit Strategy for an Industrial Products Company
If a business isn't closing down, then sooner or later, it needs to change hands. However, selling a business isn't as easy as printing out one document and giving someone a firm handshake. It can be a months-long process, and that gets a lot harder to manage if you're injured, suddenly decide to retire, or otherwise want to sell the business on short notice.
This is where having an exit strategy comes into the picture.
The Best Reasons To Consider An Exit Strategy
Here are the main reasons to consider having an exit strategy for your company, even if you're not ready to sell it quite yet. Knowing these reasons is a crucial part of learning how to prepare an exit strategy.
- Financial Prospects: A good business owner exit strategy can strengthen your economic prospects by making it easier to sell the company when you want to sell it, rather than sometime after.
- Tax Issues: An M&A exit strategy (or another sales plan) can help reduce potential tax burdens. An exit strategy framework could even eliminate tax burdens, although the possibility of that depends heavily on the unique circumstances.
- Dealing With Surprise Offers: Sometimes, companies get purchase offers they don't expect, especially if they have valuable assets like a good location. A business exit strategy makes it easier to take advantage of such offers if they occur.
- Company Planning: Businesses usually work better when they have specific goals. Business exit strategy planning can help a company focus on an outcome it wants, rather than merely reacting to the market.
- Better Valuation Estimates: Similarly, preparing things like the documents needed to sell a business can help you figure out where your strengths and weaknesses are. Once you know these, you can address them before you start looking for a sale. Most methods of business valuation take exit strategies into account.
- Smoothing Transitions: Mid market companies for sale always do better when they have a plan for a smooth transition. This can make sales easier and attract buyers that might otherwise hesitate.
- Maximizing Sale Value: A good exit strategy can help you sell your company when profits are highest. This is especially valuable when dealing with lower middle market M&A Brokers and lower middle market private equity firms. Those buyers always love to see profitable businesses.
- Health/Family Issues: Exit strategies can come into play if there are any health issues or urgent family needs. Proper exit strategies can keep the business running even if you cannot focus on it for an extended period.
- Improving Company Options: Figuring out how to sell a business quickly can give you more options if you face unexpected developments, like new technologies suddenly rendering the company obsolete.
- Dealing With Recessions:
Recessions can destroy otherwise-healthy businesses. Knowing how to sell your business to a competitor or how to sell your business online can make all the difference.
How To Sell A Business - Industrial Products
Industrial products companies have an advantage over many competitors because they frequently supply products with established needs and can quickly convert to produce and sell other products as the market demands.
If you're saying something like, "I want to sell my business where do I start?" you should know that the industrial products industry is fundamentally easier to work in than many other fields. You may not get as many offers as something like a regular storefront in San Francisco, but the offers tend to be pretty good.
Preparing to Sell a Business - Industrial Product Companies
When preparing to sell a business, there are a few questions to answer.
- Does the sale make economic sense? That is, do you make more money by selling the business instead of keeping it? There isn't much point in putting middle market businesses for sale if the sale would hurt you more than it helps.
- Will future dividends from the sale offer more than I’d pay in taxes and for advisors to make the sale happen? Answering this usually takes a bit of number-crunching. It often takes an expert to calculate this, especially with any million dollar business for sale.
- What am I going to do with the proceeds of the sale? Selling a business without knowing what you plan to do with the money you get will only trip you up. Mid market businesses for sale can generate a lot of proceeds in California, so selling a company doesn't end when you close the deal.
- What will be the rate of return of those proceeds? This is important for calculating your future finances and whether or not it makes sense to sell in the first place. If the rate of return is better than keeping the business, the sale makes financial sense.
- Are all owners onboard about selling the industrial product company? This isn't a problem if you're the only owner, but things could get complicated if owners have divided opinions. A lower middle market M&A advisor can help with this..
Types Of Industrial Product Companies
Here are some of the major types of industrial product companies in California, including industrial automation companies for sale.
Industrial Machinery And Equipment
Industrial machinery manufacturing companies typically focus on wholesale distribution of parts for other companies and manufacturers, with products ranging from metalworking tools to products for handling food, petroleum, or engines. Industrial automation companies in California often have large plants, established businesses, and adequate supply lines.
This makes them a popular target for competitors, especially those looking for industrial automation companies for sale in their niche. Buying and maintaining an existing industrial automation company can instantly expand a wholesale business, but expect to see a drop in value unless your exit strategy includes a way to keep most or all of your existing contracts.
Industrial automation and control companies do particularly well under the guidance of an M&A strategy, which can help identify potential buyers, showcase growth through acquisition, and help different industrial automation businesses stay on top of M&A trends.
Industrial Organic Chemicals
Industrial organic chemical companies are different from most of the others on this industrial companies list. A business for sale here may offer anything from industrial alcohol to rocket fuel, so M&A Brokers often focus on understanding target markets to provide better valuations.
Many organic chemical producers are a prime choice as an industrial supply business for sale thanks to generally consistent, predictable demand for bulk chemicals. Retooling factories to produce other chemicals can take a little time, but it's entirely doable.
Industrial Supplies
The supply-focused side of industrial businesses for sale includes companies that focus on wholesale components, mostly those for transporting and storing other products. An industrial supply business for sale may provide cork, bottles, crates, drums, gears, valves, ropes, and similar products.
Like organic chemical companies, these tend to be relatively easy sales because it's simple to estimate future market demands and get an accurate valuation for the company. Size is critical here. Companies that provide a huge variety of industrial supplies are generally safer purchases and, therefore, command higher prices.
If you only manufacture a few types of supplies, consider expanding your business before you try selling it. That makes industrial M&A processes
significantly
easier.
Industrial Inorganic Chemicals
In this context, inorganic chemical companies include those processing substances that either don't require organic processes to produce or are entirely synthetic. Middle market M&A Advisors usually treat these the same as organic chemical producers because, in the end, both categories ultimately come down to producing chemicals in bulk.
However, inorganic chemical companies might be a little more specialized than organic chemical companies. For example, there are only so many businesses that want, or need, to deal with nuclear fuel scrap reprocessing. Accordingly, your M&A Advisors may focus on mergers with competitors rather than selling elsewhere.
Industrial Valves
Companies that manufacture industrial valves are a relatively narrow part of the industry, but customers often want to see the continuation of any valve manufacturer for sale in their area. This is because most valves eventually need to be replaced, and replacing them with products from other companies could cause many problems.
If you want to maximize sale values, make sure your business bill of sale includes processes to help current and future customers feel confident about their purchases.
Industrial Trucks, Tractors, Trailers, and Stackers
Most businesses in this field produce highly specialized equipment for customers. For example, companies may produce aircraft engine cradles designed to fit the exact engine sizes of different aircraft or produce forklift trucks for transporting products in specific weight ranges.
Having an industrial truck business for sale be it in Southern California, the Central Valley, Silicon Valley, Bay Area or other area of Northern California can offer many growth opportunities through Mergers and Acquisitions. This is particularly true for companies that want to expand into adjacent fields and take over existing markets, rather than merely repurposing the land or changing factories.
Industrial Launderers
Industrial launderers have a particular niche. While not as valuable as some other types of businesses, these companies usually have fairly stable demand from clients who want, or need, things cleaned in specific ways. When asking questions like "how much can I sell my business for?" existing customer bases matter.
However, there is one point of complexity here. Many industrial launderers occasionally work adjacent to security-conscious facilities, including some manufacturing plants and government facilities. If you have a government contract, you may need to ensure that your buyer meets specific security requirements before you can sell to them.
General Industrial Machinery
General industrial machinery companies focus on producing general parts and tools for other companies, which puts them in a similar category to the normal machinery category we talked about above. Companies here may make things like filters, lubricating equipment, heaters, or assembly line robots.
The same principles hold here as for other basic areas with production machinery for sale. Having a diverse product line makes the company safer, and long-term contracts can help seal the deal.
Relays and Industrial Controls
These are electrical industrial companies that focus on components like vacuum relays, timing devices, and numerical controls. While not as valuable as some other businesses with commercial machines for sale, companies here often have long-term contracts that require selling to owners who will uphold those contracts.
That's an important thing to remember about any automation business for sale, but it's especially true for any company where disruptions could harm or even ruin another business. You can use this to your advantage by putting such sale requirements into contracts with customers. The long-term nature of such things is highly appealing to investors who want predictable returns.
Air Conditioning and Heating Equipment
Many air conditioning and heating equipment providers focus on specialized, client-specific products designed to meet different needs. Mid market businesses for sale here may not have long-term contracts, so the longer you've been in business, the easier it will be to sell.
Food Products Machinery
This is a narrower subset of companies that focus on industrial machinery and equipment. Food products machinery companies usually focus on tools for companies that need to process food in bulk, ranging from cider presses to bakery ovens.
Selling these companies is moderately harder than selling some other industrial products companies, but it rarely enters the realm of genuinely complex.
Further Types Of Industrial Products Companies
Outside of their individual industries, most lower middle market companies for sale in the industrial area fall into one of three primary categories.
Materials and Parts
Materials and parts include components that other companies can manufacture into goods. For example, fastener companies for sale produce specific parts for joining other parts of products together.
The difference between this category and capital items, below, is that materials and parts usually go through additional processing or use before reaching the point where the actual profit-generating product is ready for use.
Capital Items
Capital items include durable things that businesses use to produce or provide their goods and services. These generally include machinery, equipment, tools, and vehicles. Industrial product companies tend to produce either materials and parts or capital items, but rarely both.
Supplies
Industrial supply companies usually provide raw or minimally-processed goods to other businesses. For example, a sheet metal company for sale may fall into this category if it produces metal sheets for other companies to manufacture.
This is
not
the same as something like a medical supply business for sale. This can get a little confusing, but "supply" in this context refers mainly to materials that companies use, not consumer supplies.
The line can get a little blurred in cases where you have a welding supply business for sale or a landscape supply business for sale, so you may need an expert to help you pin down the correct category for your company.
Determining whether a business makes supplies, materials, or capital items is part of answering questions like "how much is my business worth?" and "how do I sell my business privately?".
Business Valuation
What is it? Why do I need one if I'm planning to exit a business? What is the business worth?
Due Diligence Checklist For Selling A Business
Completing an M&A financial due diligence checklist is a key part of preparing your exit strategy. Doing your due diligence shows potential buyers that you're serious about selling, and you're ready to negotiate in good faith with them. Consider the following:
- Does the business have all key documents about its operation readily accessible?
- Does the business have a good data system in place, such as to produce recent financial statements, payroll registers, invoicing information, customer lists, etc.?
- What are the key add-backs and adjustments to the income statement to calculate the adjusted EBITDA of the industrial products company?
- What might be the tax consequences of the sale under different price scenarios?
We'll talk more about the specifics of due diligence below, including how it relates to how to value a business based on revenue and the many documents needed to sell a business.
Learn how to plan an exit for your industrial products company
Sell-Side M&A
Four step process to market your California lower middle market business for sale
01 Exit Plan - business valuation
Your potential buyers can come from many areas. Employees, individual and group investors, Private Equity Groups, and even competitors who may have an interest in purchasing your business. If a competitor is interested, you don't want to reveal too much information about your business, especially anything that could hurt your business if the deal falls through.
Once you decide to sell, get your business ready, and get help from a trusted and accredited California M&A Advisor.
An M&A Advisor will vet potential buyers to make sure they are qualified and are serious about purchasing your business.
A California Licensed M&A Advisor knows the ins and outs of selling a California business and can help you get your business in shape to get you the best deal.
02 Buyer Analysis
One of the first things your M&A Advisor will do, is help you to create an exit plan. An M&A Advisor knows exactly how to plan an M&A exit strategy. In fact, you might get a M&A Advisor to help you with an exit plan long before you're ready to sell your California company.
An M&A Advisor is knowledgeable about how to calculate the value of a business to sell and will aim to get the highest value for your business. Once everything is ready to go, they'll list your business for sale. An M&A Advisor will be an expert at listing a California businesses for sale.
After your business is listed, the M&A Advisor will handle all the marketing of your business to promote deal origination and get you in front of potential buyers. They'll also set a buyer list and work with you to figure out who to go after for the best value.
03 Deal Origination - marketing
An M&A Advisor will then work to get you as many qualified and motivated buyers of your business as possible.
They will market your business through the proper channels, including social selling and targeting and generating interest. They'll vet and follow up with interested buyers whether off-market or publicly listed.
Once the offers come in, your M&A Advisor will evaluate all offers and conduct market offer analysis to make sure you're getting the best deal.
04 Negotiation & Closing
Buyer Due Diligence
Once a buyer is performing their own due diligence, the M&A Advisor will help you navigate the process to make sure everything is running smoothly. They'll negotiate a Letter Of Intent between you and the buyer to lay out the proposed aspects of the deal. Your M&A Advisor will also help you gather all of the necessary paperwork discussed above. If the buyer asks for additional documentation, your M&A Advisor can help guide you.
As a buyer is going through the due diligence process, they will be on the lookout for red flags about your business. An experienced M&A Advisor is knowledgeable about these warning signs and can help you prevent them. Red flags may include refusing to disclose why you're selling, not allowing time to conduct due diligence, refusal to introduce the buyer to employees, suppliers, landlords, and more.
Definitive Purchase Agreement
The M&A Advisor will oversee the Definitive Purchase Agreement with the help of the transaction attorneys to make sure both parties are happy with the terms. A Definitive Purchase Agreement protects both you and the buyer as it will clearly state exactly what is and is not being sold. It can also protect the buyer from certain liabilities. A Definitive Purchase Agreement will also help you deal with the legal complexities of selling a California lower middle market business.
Once the Definitive Purchase Agreement is finalized, the M&A Advisor will help with any final items that need to be done as part of the closing process including working with a California Licensed Escrow company.
Closing - Finalize the Transaction and Close the Deal
Finally, your M&A Advisor will help prepare the close of your transaction. Once the closing is complete, they'll assist with overseeing the transition of the business change of ownership.
Business Valuation - What's It Worth?
Valuation is one of the critical parts of selling a company correctly. If you're asking questions like "how to sell my business?" or "if I sell my business how much tax will I pay?", finding your business's valuation is arguably the most important step of the process.
The reason for this is simple: even if you want to sell a business online, buyers want to know what you're actually worth. Figuring out how to calculate the value of a business for sale may include complex factors like determining the value of a brand, calculating the actual value of existing contracts, and meeting other intangibles.
California businesses for sale also need to consider local factors, such as legislation that could affect future manufacturing processes. This is where an industrials M&A specialist can help.
A
sales forecast
can help you figure out your actual valuation. Similarly, a
3-year profit and loss projection
is useful for buyers because it helps them understand what they can expect to see in the aftermath of their purchase.
Factors Affecting Business Valuation
Whether you're figuring out how to sell a business privately or going through lower middle market mergers and acquisitions processes, you need to know factors that can affect your business valuation. These can vary by company but typically include factors like:
- Revenue trends
- Profit margins
- Details about competition
- The overall ability of the management team
- Unique competitive advantages
- EBITDA size
- Customer concentration
- Growth prospects
- Location
- Community reputation
If you want to know "how do I sell my business?", figuring out "how do I value my business?" is the first and most important step.
What is the role of M&A brokers In Selling An Industrial Products Company?
M&A brokers focus on making it easier to sell your industrial products company by identifying buyers, preparing paperwork, and otherwise smoothing out the process. Most business owners rarely sell a company more than once, so this isn't the kind of thing you typically have experience with.
Buyer Analysis - Qualifying Potential Buyers
Potential buyers are people or groups that have both the ability and the reason to purchase your company. Reasons can be practical, such as merging into another company to strengthen it, but they can also be extremely personal.
Potential buyers can include competitors, employees, individual investors, private equity organizations, family offices, or strategic/corporate investors.
M&A brokers have experience vetting potential buyers to be sure they're a good match. This includes ensuring they have enough funds, checking to see that they have a plan for continuing the business well and making sure that the offer isn't an attempt to trick you into divulging sensitive information.
Brokers can also help you figure out which of your buyers is likely to give you the best deal. Some buyers may offer you special deals, such as a portion of all revenues earned for X years, so cash available upfront isn't the only way to judge a deal.
M&A Brokers Should Manage All The Following Phases And Activities:
1. Exit Plan: The exit plan is the best path to take to sell a business. If you're not ready to sell yet, an exit plan may include several different paths that you can activate based on the situation when you want to sell.
2. Form The Strategy To Execute Listing An Industrial Services Company For Sale: Listing a company for sale may involve a fair bit of paperwork, especially if you need to get government approval before you can sell.
3. Business Valuation: M&A companies are experts at business valuation and can help ensure you get the best possible deal. Otherwise, you may overlook sources of value that canny investors will spot, leading to them trying to underbid you.
4. Marketing: A smooth marketing process is key to presenting your business as a great investment for potential buyers.
5. Buyer List: Buyer lists are a small collection of interested buyers that represent the best potential outcomes. M&A specialists can help you decide who to go after to get the best deal.
6. Deal Origination: Deal origination is the process that many potential business owners use to identify opportunities. Doing this correctly helps ensure that you'll get as many potential eyes on your business as possible.
7. Outreach Program: Outreach programs involve contacting buyers after vetting them and helping generate more interest in the deal. M&A specialists can do this on tight timetables to ensure potential buyers don't start looking elsewhere.
8. Distribution and Content: Distribution and content are a special selling technique for targeting likely buyers that might not be actively looking for a deal.
9. Evaluation: Evaluating offers is key to determining if they're worth accepting. M&A specialists also conduct market offer analysis to see how a potential offer compares to what other companies are getting.
10. Negotiation: Buyers always conduct due diligence to be sure they're getting a good deal. M&A experts can help with negotiations by providing timely information while still protecting your business if things fall through.
11. Letter of Intent: A letter of intent (LOI) is an initial, non-binding agreement between the parties in a proposed business deal. The LOI establishes the aspects of the deal.
Due Diligence - What Buyers Are Looking For:
Buyers look for a lot of things, but due diligence is one of the most important parts of the buying and selling process. When you are trying to sell, expect to provide at least the following:
- Income statements
- Records of accounts receivable and payable
- Balance sheets and tax returns, including business activity statements (last 3-5 years)
- Profit and loss records (last 2-3 years)
- Cash deposit and payment records, as reconciled with the accounts
- Utility accounts
- Bank loans and lines or letters of credit
- Minutes of directors' meetings/management meetings
- Audit work paper files (if available)
- The seller's claims about their business (e.g. their reasons for selling, the business's reputation)
- Privacy details (e.g. of employees, trading partners, customers)
- Stock
- Details about the plant, equipment, fixtures, vehicles (are they in good working order and licensed?)
- Intellectual assets of the business (e.g. intellectual property, trademarks, patents)
- Existing contracts with clients/staff
- Partnership agreements
- Lease arrangements
- Details of the business's automated financial systems
- Details of credit and historical searches related to the business.
- Value of the business to check whether the asking price is fair
Some businesses also need to provide other documents or information as necessary. For example, if you have a government contract, you may need to provide additional information about what that requires from new owners.
If you aren't sure whether documents or information that aren't on this list matter for due diligence, your M&A specialist can help you figure that out. Do not assume other documents are irrelevant or that you must provide them. Expert advice can help ensure you deliver what buyers
should
see while not divulging anything that needs to be kept private.
Warning Signs For The Buyer
Buyers look for warning signs when they're shopping around, so M&A specialists can help you avoid these potential deal-breakers. Warning signs include companies who:
- Do not disclose important information (like their reasons for selling or their licenses and permits)
- Won't agree to enough time to conduct due diligence (expect a minimum of 30 days for this)
- Won't introduce you to relevant people like their landlord, estate agent, or suppliers
- Are involved in problematic legal proceedings (minor issues may be fine)
- Are too eager to close the deal as fast as possible
- Have a questionable credit record/history
Negotiating the Definitive Purchase Agreement
Offering middle-market businesses for sale involves several steps. The
M&A Advisor works closely with you and your
legal advisor, especially while negotiating and finalizing the
Definitive Purchase Agreement. This Definitive Purchase Agreement helps both parties reach their goals for the transaction and allows no room for error as it completely represents the legal wishes of each party.
A good
M&A Definitive Agreement is the lynchpin of a good transaction. Both seller and buyer exchange a large amount of information from different sources. This is often over many months of conversations. These exchanges are then condensed, with their individual interests, as best as possible into the Purchase Agreement.
Items a typical Definitive Purchase Agreement may include:
- Treatment of Shares, Options, and any other Securities; if appropriate to the transaction
- Representations and Warranties
- Covenants
- Solicitation (“No Shop” clause)
- Financing
- Termination Fee (or “Break-Up Fee”)
- Indemnification
- Material Adverse Change (MAC) and Material Adverse Effect (MAE) Clauses
- Closing Conditions
The Definitive Purchase Agreement can have potential pitfalls, so your M&A Advisor needs to keep the communication open with the Buyer and their Deal Team as well as the Seller and their Deal Team.
The M&A Definitive Purchase Agreement also needs to include details about tax obligations and consequences, especially if shareholders are involved.
Avoiding Pitfalls if you have a Buy-Sell Agreement
What if the seller is two or more individuals?
Many businesses have multiple owners or shareholders. Getting an agreement from a majority of the shareholders about selling the business and being willing to accept an offer can be challenging. One of the shareholders may not have any interest in selling the business at all or may want something specific most buyers will not be willing to agree. If this is the case, hopefully there is a Buy-Sell Agreement in place as this will outline what each shareholder needs to do. A few years previously I had a transaction with 9 shareholders. One shareholder with a minority interest initially refused to sell. Eventually they changed their mind but it was stressful while this played out.
If no Buy-Sell Agreement is in place and there is tension between the owners and shareholders, the pressure to decide the future direction of the business may be challenging. This article provides additional information for an owner or shareholder with
how to avoid buy-sell agreement pitfalls. To help their clients, M&A Advisors should understand the importance of assumption of liability, so their buyers and sellers know who is responsible for any lingering claims.
The agreement also needs to have information about indemnity clauses regarding operations. For Industrial Products Companies, concerns about environmental liability, breaches of warranties, and other issues need to be factored into the indemnity clauses of a Definitive Purchase Agreement.
Buy-sell agreements can be confusing, so it is helpful to learn
how to understand buy-sell agreements and
how a buy-sell agreement can save a business.
Buy-Sell Agreement Benefits
Buy-sell agreements are beneficial for all businesses with multiple owners, especially because they can help make it possible for one owner to exit the business while allowing others to remain. This can also help comfort buyers by ensuring some continuity of authority.
Existing employees and customers are far less likely to react negatively if only part of the business is sold and most of the staff remain with the company. Customers often re-evaluate contracts if the entire senior leadership of a company changes, so a buy-sell agreement can help protect future revenue and increase the business valuation.
Free Business Valuation Guide
Learn more about business valuation and why it matters the most while planning an M&A exit strategy.
Finalize The Contract
Finalizing a contract is often far more complicated than it looks at first. Every party involved needs to read and review the contract to ensure that it includes everything they previously discussed and agreed to. Verbal agreements often hold little or no weight in disputes, so contracts must be written down.
M&A brokers can help create these contracts, evaluate them for accuracy, and get them over to clients faster. This is especially useful if you want to sell as soon as possible, whether or not you've admitted that to the buyers.
This step is fundamentally procedural, and part of working with an agent is figuring out who would walk away before getting to this stage. As a result, finalizing contracts usually go through without issues. If there is a problem, it's often because someone failed to do their due diligence.
M&A LOWER MIDDLE MARKET ADVISORY
Why Work With Rogerson Business Services?
Business Valuation
Many sellers neglect the business valuation and methodology early in the process, only to become frustrated after the deal has been finalized. Rogerson Business Services can help you understand the value of your business based on different methodologies.
Legal Due Diligence
When selling a business, the legal standing of the business determines the smoothness, efficiency, and speed at which the transaction is finalized. M&A Advisors offer a sell-side M&A process backed by the viability of a California Licensed business or transaction attorney. With a licensed California M&A Advisor, you can be certain the legal documents involved in the sell-side M&A process is detailed and accurate.
Business Analysis
To avoid wasting time with unqualified buyers, get help from a trusted, licensed, and accredited California M&A Advisor. An M&A Advisor will vet potential buyers to make sure they're legitimate and are serious about purchasing your business. An M&A Advisor knows the ins and outs of selling a lower middle market business and can also help you get your business in shape to get you the best deal.
Financial Due Diligence
Our service includes deal team professionals to assist you. From financial to legal documents to tax and procedures, we want to make sure you are covered.
If you have your own in-house team of advisors, Rogerson Business Services can help make the M&A sell-side process as easy as possible by offering insights that help the team understand and are in alignment with the same goals as yours.
Definitive Purchase Agreement
The Definitive Purchase Agreement is usually extremely complex. It is easy to overlook all the terms and legal jargon, but every paragraph is important and duly considered. It is therefore critical to ask questions and ensure you are comfortable with the final set of legal documents you need to sign.
M&A Sell-Side Targeting
Rogerson Business Services provide Mergers & Acquisition M&A Sell-Side Advisory. We zero target off-market, accretive, private equity and strategic buyers with an interest in lower to middle market companies or businesses to maximize incremental growth value.
Closing - Finalize The Transaction And Close The Deal
Closing is similar to finalizing a contract, but it is where the money actually goes from person to person and, usually, ownership promptly changes hands. There are many different ways of closing transactions, but for selling Industrial Product companies, we often recommend using an escrow service.
Most California business owners may already be familiar with this, but an
escrow
service is a neutral third-party company operating under California law, that can hold money, deeds, or other assets for a transaction and only release them under specific terms. Putting money into escrow is a good way of demonstrating that the buyer actually has the money to finalize the deal.
Escrow is often part of a seller's due diligence, but most buyers don't put millions of dollars into escrow just to make an offer. That usually happens later in the process, once both parties are extremely confident in the deal and ready to commit to it.
Facilitate The Business Transition
Once you're going through closing and you've closed the deal, it's time to facilitate the business transition. This can take many forms depending on the type of business you used to own and how much experience the new owner has in the industry, but there are several common things that happen.
- Introductions: The new owner may ask you to introduce them to any senior staff they haven't met yet, then the rest of the company. Personal introductions can help employees accept new owners.
- Owner Access: Owner access includes the physical and digital keys and passwords for the company, such that the new owner has whatever level of access they are entitled to. Note that for security reasons, even owners may not have access to certain systems. New owners usually change keys and passwords after receiving access.
- Advice: You may remain available for a set time to provide general advice for the new owner, ensuring they learn everything they need to know to run the business.
Finalize To Achieve A Smooth Transition
Finally, achieving a smooth transition involves a variety of different steps, often to the point that selling your business on your own is a mistake. Remember that buyers have specific goals when they are acquiring your company, so finalizing things in a way that supports those goals makes for a smoother, easier sale.
Barriers to acquisition strategies include things like poor matchmaking, miscalculations, and conflict between management and workers. Employees may talk about harsh decisions, job security, or changing company focuses. Existing clients may hesitate to commit to new projects until the new owner regains their confidence.
Even more, variations in personal workstyles may create gulfs between employees, or
you
could take your funds to prop up competitors. That's right. Buyers want to protect themselves from you just as much as you want to protect yourself from problems they might cause.
The easiest way to achieve a smooth transition is creating prior agreements and having a robust analysis of all potential risk factors. This is where your M&A Advisor can step in and provide whatever guidance is necessary in your unique situation.
Conclusion
As you learned in this article, selling an Industrial Product company is an enormous undertaking. You need to determine how to value your company, position your business to be an attractive acquisition, sort through various offers, conduct intensive due diligence, and avoid both legal and procedural pitfalls.
It is not rare for this process to take months, or even years if you're trying to maximize the value of your sale. An M&A Advisor can help you through every step of the process, starting from when you are thinking about creating an exit strategy and going all the way through the post-closing work.
Need help planning your business exit?
Rogerson Business Services (RBS) is an M&A Advisory for lower middle market businesses that is built on trust and ethics. Andrew Rogerson, Certified M&A Advisor, can help you find answers to all your questions, introduce you to better opportunities, and manage the buying and selling an industrial products company in California process's integrity while keeping every aspect of sales confidential.
FAQ's
Sell-Side M&A
Sell a Business
Business Valuation
Ten Reasons to Plan a Business Exit Strategy with
Rogerson Business Services
1. Ethics
Rogerson Business Services are members of the M&A Source, International Business Brokers Association (IBBA) and California Association of Business Brokers (CABB) and adhere to their code of ethics.
2. Confidentiality
Rogerson Business Services assists you professionally in a highly confidential manner to protect your personal and financial details.
3. Vetted businesses for sale
Rogerson Business Services have access to an inventory of businesses including unlisted businesses for sale in California.
4. Facilitator
Rogerson Business Services are specialists in business transitions and understand the need to respect all parties in the transaction. There are many steps to value, sell and buy a business. Rogerson Business Services have successfully navigated these steps many, many times.
5. Valuation
Rogerson Business Services can provide you an opinion of value of a business you wish to sell or buy.
6. Due diligence and escrow
Rogerson Business Services has the knowledge to work through leases, franchise agreements, finance requirements, licensing, California escrow requirement and many other items so the sale of a business is successful.
7. Negotiation
Rogerson Business Services practice win/win negotiation skills. Negotiations are rarely perfect and so a win/win approach is the best way forward.
8. Financing and funding
Rogerson Business Services has professional lenders that can assist with finance to successfully buy a business.
9. Resource
Rogerson Business Services is an active member in the associations of the M&A and Business Broker industry including M&A Source, the International Business Brokers Association (IBBA), California Association of Business Brokers (CABB), International Society of Business Appraisers (ISBA) as well as other professional organizations.
10. Closing and transfer
Rogerson Business Services works with you each step of the way. This includes managing the buying or selling of your business through initial negotiations, due diligence, escrow and the all-important closing.
We built this amazing step-by-step-guide to help "Exit an Industrial Products Company" - it is yours (free)
Rogerson Business Services provide Mergers & Acquisition M&A Sell-Side Advisory. We zero target off-market, accretive, private equity and strategic byers in lower middle market companies or businesses to maximize incremental growth value.
Reach out to any of our Deal Team & Advisors for a confidential conversation to see if we are a good fit.
We Help You Maximize The Value Of Your Business Before Selling it
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(844) 414-9600
5150 Fair Oaks Blvd, #101-198
Carmichael, CA, 95608
CA DRE# 01861204
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