There are several reasons why a manufacturing SMEs might decide to embark on a sell-side M&A process, that is, selling the business.

This can occur when the owners or partners decide to sell a portion or the entirety of the company, or when they choose to integrate with a larger entity to secure the company’s future. This is particularly relevant for manufacturing businesses.

This scenario is common, for example, in a component factory or a precision mechanics company seeking growth or modernization through new partnerships.

But how does the sales process work, and how does a sell-side M&A for an SME differ from an operation involving larger, more complex organizations? Here are the stages of the sale.

1. Strategic context analysis and market research

In the context of manufacturing SMEs, the initial phases of a sell-side process are crucial. Before approaching the market and seeking potential buyers, it’s necessary to present the company effectively to potential acquirers, who often look for specific technical skills or distinctive market positions. To create an attractive image for the sale, it’s important to communicate not only the company’s past and present but also its growth potential and competitive advantage that could result from the acquisition. This is achieved by professionally analyzing data and producing a document that is objective yet able to “envision the future” for those interested in acquiring the manufacturing SME.

2. Accurate documentation

For manufacturing SMEs, it’s essential to focus on:

• Market context in which they operate
• Business model
• Competitive positioning
• Efficiency of production processes
• Characteristics of the machinery used
• Quality of products/services
• Organizational structure
• Stability of supplier and customer relationships

These elements, along with the financial figures, are presented to the market through an Information Memorandum that demonstrates the company’s ability to adapt to market changes and innovate. Preparing a complete and accurate set of documentation is crucial to attract qualified buyers and ensure the success of the M&A transaction, even after the merger.

3. Search for potential buyers

The search for potential buyers is a delicate phase of the sales process. At Winnerge, we utilize advanced search techniques (platforms and AI) and a broad network of contacts to identify and qualify the most suitable buyers. This includes using specialized databases, conducting market analysis, and evaluating strategic compatibility. Once potential buyers are identified, we initiate preliminary contacts to assess their interest and willingness to proceed with the acquisition.

4. Teaser

Revealing sensitive information at the beginning of negotiations could be detrimental to the SME. The teaser must be designed to highlight the company’s unique strengths, such as craftsmanship quality or specialization. It is the first level of documentation released without compromising confidentiality.

5. Synergy and management

Meetings between the management of the acquiring company and the selling manufacturing SME are particularly important due to the nature of small or medium enterprises, where the knowledge and human experience of management are often crucial.

6. Choosing the buyer and negotiation

In selling a manufacturing SME, the choice of buyer is not based solely on price but also on compatibility with the company’s vision and future development potential. For example, a family-owned business might prefer a buyer who intends to preserve the company culture and invest in long-term growth rather than maximizing immediate profit.

Summary

Selling a manufacturing company is not a simple or immediate process. It is a complex journey requiring planning and strategy. As we have seen, it is essential to present the company attractively to potential buyers, choose the most suitable sales approach, and prepare comprehensive and convincing documentation.

The value of a manufacturing SME is not only in its tangible assets but also in its know-how, market reputation, and established relationships with clients and suppliers. Transparency, combined with a well-planned sales strategy, can maximize shareholder value and ensure a smooth transition to new ownership.

The right buyer choice is not based solely on the offered price but also on strategic compatibility and the future vision for the company. It is crucial to consider how the buyer intends to develop the company and maintain commitment to employees and the local community.

Ultimately, selling a manufacturing SME is not just a commercial transaction but a critical step that can define the company’s future.

With the right preparation and support from expert advisors like Winnerge, SME owners can approach this process with confidence, ensuring the best possible outcome for themselves, their employees, and the company’s legacy.