The concrete manufacturing industry, regardless of your subsector, remains strong and should continue to grow moving forward. This is good news for owners, who are faced with a decision to either continue growing or sell while valuations are incredibly high. For the purpose of this review, we will focus on owners who intend to sell their concrete manufacturing company. Specifically, we discuss the valuation and sales process.
About The Concrete Manufacturing Industry
There are a range of sub sectors within the incredibly large concrete manufacturing industry. Specifically, we discuss the data and trends (along with the valuation and sales process) for the ready-mix concrete, pre-cast concrete, and pipe and block concrete manufacturing industries.
Ready-Mix Concrete Manufacturing
This industry comprises establishments, such as batch plants or mix plants, primarily engaged in manufacturing concrete delivered to a purchaser in a plastic and unhardened state (Business Reference Guide). There are 6,187 ready-mix concrete manufacturing companies across the United States. The industry has grown by 1.3% since 2018 and experts predict a 1.4% annual increase through 2028. The industry produces $38.1 billion in revenue ($2.1 billion in profit).
Pre-Cast Concrete Manufacturing
There are approximately 2,210 pre-cast concrete manufacturing companies in the United States. The industry has seen a 2.2% annual increase dating back to 2018, and the growth should continue at a 1.4% annualized rate through 2028. The pre-cast concrete industry produces $15.7 billion in revenue ($957.8 million in profit).
Concrete Pipe and Block Manufacturing
This industry uses concrete materials to produce concrete pipes and blocks that are then used for a multitude of purposes (construction-related and otherwise). The industry has grown at 1.4% over the past 5 years, and it should continue to grow at a 0.6% rate through 2028. This industry produces $7.8 billion in revenue ($342.9 million in profits).
How to Value a Concrete Manufacturing Company
You will need certain financial documents to determine the value of your concrete manufacturing company, such as your tax returns, profit and loss (P&L) statements, and cash flow statements. With this information, your business broker can calculate your EBITDA and SDE and then apply these figures to the rule of thumb data below. Of course, your broker may also apply adjustments based on non-financial considerations, such as your growth potential, workforce quality, and reason for selling.
- Concrete manufacturing companies sold for approximately 3.14 times the Seller’s Discretionary Earnings (SDE)
- Concrete manufacturing companies sold for approximately 7.79 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Concrete manufacturing companies sold for approximately 0.67 times the annual net sales
How to Sell a Concrete Manufacturing Company
The sales process for concrete manufacturing companies may look different than the sales process for other types of manufacturing companies. Specifically, your market is unique, and you should tailor your sales process accordingly. Below is our recommendation for how to sell your concrete manufacturing company in the most successful and stress-free manner possible.
- Valuation stage
- Planning stage
- Marketing stage
- Due diligence stage
- Closing stage
#1: Valuation Stage
We have discussed the importance of a business valuation that uses a market approach if you are planning your exit strategy (see above). Your value helps you plan your exit strategy goals and sales expectations. It also lets you know if you need to take additional measures to improve your value before you sell your concrete manufacturing company. For instance, simply organizing bookkeeping and financial information may help you secure a higher sale price. Whatever the case may be, your valuation should always be the starting point when selling.
#2: Planning Stage
You will then need to plan and prepare for the sale of your concrete manufacturing company. Otherwise, if you were to jump directly into the marketing stage of the sale, you would be unprepared and have a much greater risk of selling below market value (or not selling at all). Although it takes time and effort to properly prepare, it pays huge dividends long-term. Specifically, you should focus on the following steps during this stage:
Plan your exit strategy goals and long-term vision
First, you will need to plan your exit strategy goals as well as the long-term vision you have for yourself after you sale. For instance, perhaps you want to sell without any seller financing and limited training, and you want to retire and spend more time with your kids and grandkids.
Prepare your company documents
You will also need to arrange your company’s documents. This includes legal, financial, and operational documents. Notably, you will need to prepare business licenses, tax returns, internal profit and loss statements, employee lists, and asset lists.
Prepare your confidential information memorandum (CIM) and video interview
We recommend using a CIM, which displays the important details of your company in a confidential manner. We also recommend a video interview in which you provide a tour and answer important questions about your concrete manufacturing company.
Prepare your non-disclosure agreement (NDA)
An NDA protects your company’s information. It helps ensure news of your sale is not leaked to the public. It can also help prevent competitors who view your information from using the information against you.
Notify necessary parties that you intend to sell
You want to keep the sale of your company as confidential as possible. However, there may be cases where you need to notify certain members of the company, such as your business partners (i.e. other owners) and your internal chief financial officer (CFO).
#3: Marketing Stage
The third step involves bringing your business to the market in a confidential manner. More specifically, your business broker will bring your company to the market on your behalf, leveraging their industry connections, contacts, databases, etc. to ensure the confidentiality of the sale is maintained and you are able to present your company to hundreds of potential buyers. Ultimately, you will receive offers, which are screened by your broker. From there, negotiations take place until a deal is finalized with a buyer you trust and are ready to move forward with. They will sign a letter of intent (LOI) to lock-in the deal.
#4: Due Diligence Stage
The buyer has the right to due diligence. This means they have the opportunity to audit and investigate your company. They are specifically looking for anything that may give them pause or is not consistent with what was presented to them during the negotiation stage. In doing so, they may request your legal, financial, and operational documents, visit your facilities and oversee daily operation, and meet with certain members of your company (other owners, executives, etc.).
#5: Closing Stage
Lastly, after due diligence, you (the seller) and the buyer will schedule a time for the closing meeting. This could happen in person or virtually. During the meeting, you can expect the following to occur:
- The buyer and the seller review and sign the purchase agreement (along with their respective attorneys)
- The buyer releases the payment for the business (via an escrow agent or direct payment)
- The seller begins the transition process (i.e. updates legal information, insurance policies, leases, etc.)
The seller may have an obligation to help train the buyer in certain instances. Of course, these details are discussed during negotiations and due diligence. The next steps are discussed. The seller may also introduce the buyer to all employees, suppliers, and clients during or soon after closing.
Are You Planning Your Exit Strategy?
Now is a great time to sell a concrete manufacturing company as valuations are relatively high. If you are planning your exit strategy and/or simply want to understand your company’s value, then receive a free, no-obligation business valuation from Sigma Mergers and Acquisitions. Contact us today to get started.