Unlike many other manufacturing industries that are facing significant import challenges, the fiber manufacturing and processing industry still performs well. Consequently, there is high demand for established companies, which bodes well for owners who are planning their exit strategy. In this review from a qualified and experienced business broker, we discuss how to value and sell your fiber manufacturing and processing company for fair market value.
About The Fiber Manufacturing and Processing Industry
The fiber manufacturing and processing industry is unique in the sense that there is far less international competition than in other manufacturing industries. Among other reasons, the lack of foreign competition makes it an appealing sector to enter for many investors. In fact, the demand for well-established fiber manufacturing and processing companies is high, and many investors are paying high multiples to acquire them. Of course, there are many factors that influence value (see below), not the least of which are the products provided to customers. Most commonly the fiber manufacturing and processing industry engages in the following:
- Spinning yarn
- Manufacturing thread (of any fiber)
- Texturizing, throwing, twisting, and winding purchased yarn or manmade fiber filaments
- Producing hemp yarn and further processing into rope or bags.
Rule of Thumb Data for a Market-Based Valuation
The most notable factors that impact the value of a fiber manufacturing and processing company include your manufacturing services, the quality of your workforce, the diversity of your customers, and your growth potential. A diverse clientele usually leads to much greater value, particularly since many manufacturers within this space keep a small list of clients.
However, of course, your company’s financial information plays a role. Specifically, your broker will calculate your EBITDA and SDE and apply them to rule of thumb data for your industry (or acquisition multiples). A tentative guide to the most up-to-date acquisition multiples for the fiber manufacturing and processing industry is as follows:
- Fiber manufacturing and processing companies sold for approximately 1.89 times the Seller’s Discretionary Earnings (SDE)
- Fiber manufacturing and processing companies sold for approximately 5.83 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Fiber manufacturing and processing companies sold for approximately 0.57 times the annual net sales
Keep in mind, the ranges are relatively wide, and rule of thumb data is only sometimes reliable when it comes to valuing your fiber manufacturing and processing company specifically. Due to this, we strongly advise a professional business valuation from a qualified and experienced broker who understands your industry well.
The Sales Process for a Fiber Manufacturing and Processing Company
Although it may at first seem overwhelming, you can sell your fiber manufacturing and processing company in a stress-free manner by following the process below. Of course, we strongly recommend choosing a business broker you can trust before you begin.
- Market-based valuation
- Exit strategy planning
- Sale preparation
- Confidential marketing
- Due Diligence
- Sale Closing
- Business transfer
Market-Based Valuation
As discussed above, a professional business valuation with a market approach is the best way to start your sales journey. A professional valuation from an experienced and trusted broker lets prospective buyers know that your asking price is justified according to recent sales data and the specifics of your fiber manufacturing and processing company.
Exit Strategy Planning
Your valuation also determines your sales approach. For instance, if you are satisfied with your current value, then your broker may recommend going to market as soon as possible. In other cases, it may be best to work on your value and list when the market is most favorable. These details and more are discussed during this second step.
Sale Preparation
Once you plan your exit strategy, you should then prepare for the sale. This notably includes collecting your legal, financial, and organizational documents, such as tax returns, employee records, customer lists, list (and value) of inventory, a copy of your insurance policy, and rental agreements (if applicable). Of course, more documents may be needed depending on the specifics of your company.
Confidential Marketing
Fiber manufacturing and processing company owners must sell in a confidential manner to avoid business disruptions, such as employees leaving the company or the loss of customers due to fears of a sale. Your broker can help maintain confidentiality and should only utilize private sales channels. If necessary, they should be able to implement blind listings, non-disclosure agreements, and more to protect the privacy of the sale.
Due Diligence
This is a time awarded to the buyer to verify all information about your company before they purchase. There are several steps that are usually included, which are:
- Review of your company documents
- Q&A session to learn more and verify information
- Tour of your fiber manufacturing and processing facility
- Interviews with your business partners and top employees
Sale Closing
You will need to bring certain documents with you to the closing table, such as a copy of your purchase agreement, your bank information, etc. Your broker (along with your attorney and CPA, if applicable) can help you prepare for closing. Your attorney should also attend; your broker may attend as well. During closing, you will review the purchase agreement, attain the final signatures, and confirm the payment.
Business Transfer
The business transfer takes a variety of steps. It starts during closing (or before) and may continue until after closing. Notably, during this final stage, you will notify your employees of the sale, notify your customers of the sale, update legal and insurance information, and provide the buyer with access to all facilities, records, and online systems.
Speak With an Experienced Business Broker
Here at Sigma Mergers and Acquisitions, we understand how to sell your fiber manufacturing and processing company for fair market value or higher. We start the process with a consultation and free, no-obligation business valuation. This helps you plan your exit strategy. From there, we get to work until the deal is finalized. Contact us today to learn more and get started.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
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