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NEO Business Advisors, an expert in mergers and acquisitions (M&A) specializing in the manufacturing sector, recently assisted a family-owned manufacturing business in navigating the complex process of selling their company. After receiving an unsolicited offer of $4 million from a potential buyer, the owners sought professional advice to ensure they were getting fair market value for their business. With the help of Nick Fares at NEO Business Advisors, the owners were able to negotiate a final sale price of $5.8 million—an impressive $1.8 million increase over the original offer. This case study highlights how NEO Business Advisors’ strategic approach and industry expertise made all the difference in maximizing value for their client.
Client Background: A Family-Owned Manufacturing Business
The client, a husband and wife team, had run a successful manufacturing company for years. Though they were not actively seeking to sell the business, retirement was beginning to enter their minds, particularly for the husband, who was older and more ready to step away from the business than his wife. The company had garnered attention within their industry, and eventually, an unsolicited offer arrived from a buyer backed by private equity. The offer was for $4 million, which seemed like a substantial amount to the owners, but they were unsure whether it truly reflected the value of their business.
Faced with the decision of whether to accept the offer, the owners turned to their trusted accountant for advice. Recognizing the complexities of business sales and the specialized knowledge required to accurately value a company, the accountant recommended that they speak with Nick Fares of NEO Business Advisors, a firm well-versed in M&A for manufacturing companies. The owners were open to exploring the possibility of a sale but needed to be sure they weren’t leaving money on the table.
The Challenge: Determining the True Market Value
The primary challenge for NEO Business Advisors was to determine whether the $4 million offer was truly reflective of the business’s value, especially given that it came unsolicited and without a formal competitive process. Additionally, the owners needed guidance on several critical factors beyond the initial offer amount, including how much they would actually take home after taxes and other considerations like outstanding debts.
Nick’s task was to perform a comprehensive business valuation using multiple methods to ensure the owners had a complete understanding of their company’s worth before making any decisions. Beyond just the dollar amount, he also had to evaluate the structure of the offer to ensure it was beneficial to the owners in both the short and long term. In addition to these immediate concerns, Nick needed to prepare the company for market in case they decided to reject the initial offer and pursue a formal sales process.
Why the Client Chose NEO Business Advisors
The decision to engage NEO Business Advisors came largely through the recommendation of the client’s accountant, who had previously worked with Nick and was familiar with his expertise in manufacturing M&A. Nick’s track record of helping businesses navigate complex deals and his deep knowledge of the manufacturing sector made him the ideal partner for this transaction.
During the initial consultation, Nick walked the owners through the valuation process, helping them understand key concepts like adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which would play a critical role in assessing the value of their business. The owners were also reassured by Nick’s clear explanation of the competitive process that could help drive up the offer and bring in additional interested buyers, thus increasing the chances of achieving the best possible outcome.
NEO Business Advisors’ Strategic Approach
Nick and his team at NEO Business Advisors quickly got to work, performing a detailed valuation of the business using four different methods to ensure a comprehensive analysis. The valuation included a recasting of the company’s financial history to reflect normalized earnings and adjusted EBITDA. This process involved looking at factors such as discretionary owner expenses, non-recurring costs, and other adjustments that would provide a clearer picture of the company’s true profitability.
The analysis revealed that the business was worth significantly more than the initial offer, with an estimated range of $5.5 million to $6.2 million. Armed with this new information, the owners decided to reject the $4 million offer and proceed with listing their company on the market. NEO Business Advisors prepared the necessary marketing materials and began reaching out to potential buyers in their network, making it clear that this would be a competitive process.
One of the key aspects of NEO Business Advisors’ strategy was maintaining communication with the original buyer while also engaging new prospects. Nick informed the buyer that their initial offer was too low and that they would need to raise it if they were serious about acquiring the company. By introducing competition into the process, Nick was able to leverage the buyer’s interest to drive up the price. This strategic approach resulted in the original buyer increasing their offer to $5.8 million—a significant improvement over their initial bid.
The Results: A $5.8M Sale for the Client
The sale of the business was finalized on August 1st, with a closing price of $5.8 million—an increase of $1.8 million from the original offer. This outcome was not only a financial victory for the owners, but it also demonstrated the value of having an experienced M&A advisor like NEO Business Advisors on their side. Nick’s expertise in manufacturing and his ability to negotiate a better deal allowed the owners to walk away with significantly more than they initially expected.
Throughout the process, Nick also provided valuable guidance on the structure of the deal, helping the owners navigate important considerations such as tax implications. For example, Nick ensured that part of the payment structure was deferred into future years, allowing the owners to spread out their income and reduce their tax burden in the years following the sale. This strategic approach helped maximize the amount they would ultimately take home after taxes.
Moreover, Nick’s network of professionals, including attorneys and financial planners, ensured that every aspect of the sale was handled by experts, from legal representation to post-sale financial management. The owners were introduced to key advisors who would help them manage their wealth and plan for their financial future after the sale.
Maximizing Value with NEO Business Advisors
If you’ve received an unsolicited offer or are considering selling your business, don’t make the mistake of navigating the process alone. NEO Business Advisors can help you unlock the full value of your business through expert M&A advisory services. With a proven track record in the manufacturing industry, they can guide you through every step of the process, from valuation to negotiation and closing. Contact NEO Business Advisors today to learn how they can help you maximize the value of your business. Visit neobusinessadvisors.com or call (330) 322-5088 to schedule a consultation.