In many manufacturing SMEs, there is one person who knows every machine, solves every emergency and understands how to keep production running even when something goes wrong.

That person is often the production manager. They may have been with the company for years and know its equipment, suppliers, timing, recurring issues and operational solutions better than anyone else. Their experience is a major asset for the business.

The problem arises when that experience does not truly belong to the organisation, but remains concentrated in one individual.

During the sale of an SME, dependence on a production manager can become an M&A risk. A buyer needs to understand whether the company will continue to manufacture with the same quality, efficiency and reliability after a change in ownership, management or organisation.

When a key person becomes a business risk

Having a capable production manager is not a weakness. On the contrary, a respected and experienced professional can make the company more attractive.

The risk emerges when production continuity depends almost entirely on that person.

This typically happens when:

• only the production manager fully understands the critical production parameters;
• procedures exist mainly in their memory rather than in company documentation;
• maintenance issues, emergencies and quality problems are handled informally;
• relationships with technical suppliers and maintenance providers depend exclusively on them;
• no one else has the skills required to replace them;
• operational decisions continuously require their direct involvement.

In these situations, the company does not simply have a highly capable employee. It depends on someone who is difficult to replace.

The distinction is significant. Shared expertise strengthens the business. Concentrated expertise increases operational risk.

What a buyer assesses during due diligence

During the due diligence of a manufacturing SME, a buyer does not look only at production capacity, the condition of the machinery or the investments that may be required.

The buyer also wants to understand how production actually works.

The analysis normally covers production planning, shift organisation, quality control, maintenance, waste management and the company’s ability to deal with interruptions, delays or peaks in demand.

When it becomes clear that many of these activities depend on one person, the perceived risk increases.

The buyer will want to know what would happen if the production manager decided to leave after the transaction, did not support the new industrial project or was unwilling to assist during the transition.

The issue is not the quality of the individual, but the weakness of the organisation built around them.

Why the risk may only become visible during a sale

From the entrepreneur’s perspective, the central role of the production manager may appear reassuring.

Production runs smoothly, problems are solved and deliveries are made on time. As long as the person remains in place, the system seems stable.

A buyer, however, views the company from a different perspective. The focus is not only on what works today, but on whether that performance can be replicated and transferred after closing.

An organisation that depends on the memory, experience and personal relationships of a single employee may seem efficient in day-to-day operations, but fragile in terms of long-term continuity.

This is where a person seen as indispensable by the entrepreneur may become a risk factor for a potential buyer.

How dependence on the production manager affects value

Dependence on a key person rarely causes a transaction to fail on its own. It can, however, have a significant impact on the terms of the deal.

The buyer may request:

• that the production manager remains with the company for a defined period;
• a retention agreement to reduce the risk of departure;
• a structured handover to other employees;
• additional guarantees regarding production continuity;
• organisational investments after closing;
• more cautious financial terms.

In some cases, the risk may directly affect the price. In others, it may be managed through deferred consideration, retention obligations or clauses linked to the continued presence of key employees.

The more the company depends on expertise that has not been transferred, the greater the buyer’s need to protect the investment.

The value is not reduced because the production manager is too capable. It is reduced because the company has not yet turned that capability into an organisational asset.

Production know-how must belong to the company

The value of an SME depends not only on the skills available within the business, but also on the organisation’s ability to retain and transfer them.

If production know-how remains in one person’s head, its value is fragile. If it is translated into procedures, data, shared responsibilities and control systems, it becomes part of the company’s assets.

At a minimum, the company should document:

• production processes and cycles;
• critical operating parameters;
• quality control procedures;
• maintenance plans;
• non-conformity management;
• operational roles and responsibilities;
• relationships with strategic technical suppliers;
• procedures for handling emergencies.

Documenting processes does not mean making production rigid or introducing unnecessary bureaucracy. It means ensuring that what currently works because of individual experience can also be repeated by the organisation.

Clear documentation also makes it easier to train new employees, reduce errors and maintain continuity during absences or organisational changes.

Building a second line in production

Reducing dependence on the production manager does not mean replacing them or diminishing their role.

On the contrary, it means recognising the value of their experience and asking them to help make it transferable.

An effective process may include:

• identifying someone to work alongside them;
• gradually sharing responsibilities;
• training supervisors and technical staff;
• documenting the most critical procedures;
• creating regular opportunities for knowledge sharing;
• defining a replacement plan for emergencies.

The objective is not to create a perfect substitute immediately, but to prevent the absence of one person from stopping decisions, production or deliveries.

A credible second line is not created simply by assigning a new title. It requires real delegation, access to information and the gradual transfer of operational responsibility.

Retention and knowledge transfer in an M&A transaction

When a sale is already under way, the continued involvement of the production manager may become one of the conditions required to reach closing.

In these situations, the seller and buyer may agree on specific tools to protect continuity, such as financial incentives, retention bonuses or a defined knowledge-transfer plan.

These solutions can support the transaction, but they do not remove the underlying organisational issue.

A retention agreement keeps the person in place temporarily. It does not automatically make the company independent.

The period following the acquisition should therefore be used to share knowledge, strengthen the team and gradually reduce dependence on one individual.

Without a clear plan, the risk is only postponed.

The issue should be addressed before the sale

Trying to reduce dependence on a key person after negotiations have already started is difficult.

A buyer will quickly recognise whether documentation has been prepared at the last minute or whether the organisation still lacks genuine autonomy.

For this reason, the issue should be addressed before a sale becomes imminent.

An SME that invests early in the transferability of skills can approach the market with a stronger organisation, reduce perceived risk and better defend its value.

The benefits are not limited to a future M&A transaction. A company that is less dependent on individual employees is also better equipped to grow, manage unexpected events, recruit new people and handle organisational change.

Conclusion

An experienced production manager can be one of the most important assets of an SME.

They become a risk when the company cannot operate without them and when expertise, relationships and operational decisions remain concentrated in one person.

The difference lies in the ability to turn individual knowledge into organisational value through documented processes, shared responsibilities and a credible second line.

In an M&A process, a buyer does not assess only who keeps production running today. The buyer also needs to know whether the company will continue to operate tomorrow.

Addressing this dependence before a sale helps protect operational continuity, reduce perceived risk and make the value created over time more transferable.

Frequently asked questions

Does dependence on a production manager reduce company value?

It can, particularly when production continuity relies on knowledge that is not documented and is difficult to transfer. The impact depends on the strength of the second line, the likelihood that the person will remain and the level of process autonomy.

Can a buyer require the production manager to stay after the sale?

Yes. The continued involvement of key employees may be addressed through retention agreements, financial incentives or defined transition periods.

How can the risk linked to a key person be reduced?

The company should document processes, distribute responsibilities, train other employees and prepare a replacement plan for the most critical activities.

When should the company address the issue?

Ideally, before the sale process begins. Building an organisation that can operate independently takes time and cannot be improvised during due diligence.