Structural metal product manufacturing company owners are in a good position as valuations remain relatively high. If you are an owner of a manufacturing company who is contemplating (or deciding on) their exit strategy and selling their company, then this guide is for you. Specifically, we discuss how you can determine the value of your structural metal product manufacturing company and sell it for fair market value or greater.
About The Structural Metal Product Manufacturing Industry
Structural metal products play an integral role in numerous industries. For instance, the are critical for metal frameworks and parts used for construction purposes. A structural metal product manufacturing company produces goods fabricated structural metal, a highly technical task that requires a fair amount of training.
Due to this, there is a relatively high barrier to entry, which provides stability for established companies. Industry profit has remained consistent and should continue to remain strong throughout the next five years. This bodes well for owners of structural metal product manufacturing companies as there is excellent demand. Here are the most recent industry numbers and projections:
- There are approximately 6,090 structural metal product manufacturing companies in the U.S.
- There was a 0.4% annual growth for the structural metal product manufacturing industry from 2018 to 2023
- The structural metal product manufacturing industry generates $68.1 billion in annual revenue
- The annual profit for the structural metal product manufacturing industry is $3.3 billion
- Experts predict a slight increase in annual growth (0.9%) from 2023 to 2028
How Do I Determine The Worth of My Structural Product Manufacturing Company?
You can determine the worth of your company by receiving a professional valuation from an experienced business broker. They will most likely use a market-based approach. With this valuation method, the broker determines your discretionary earnings (SDE) and other financial metrics(i.e. EBITDA, net sales, gross profit, etc.). This is then applied to the following rule of thumb data for your industry:
- Structural metal product manufacturing companies sold between 2.08 and 2.95 times the Seller’s Discretionary Earnings (SDE)
- Structural metal product manufacturing companies sold between 1.99 and 3.30 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Structural metal product manufacturing companies sold between 0.40 and 0.58 times the annual net sales
Of course, non-financial considerations are also applied in the form of adjustments. This could be related to growth potential, workforce quality, customer concentration, and your reason for selling (among other considerations).Your value may be higher or lower than the rule of thumb data suggests based on the specifics of your structural metal product manufacturing company.
How Can I Sell My Structural Metal Product Manufacturing Company?
Selling a metal product manufacturing company involves more than simply finding a buyer and having them pay you for it. Instead, you will need to properly value your company, prepare your legal and financial documents and information, seek offers in a confidential manner, negotiate a deal, allow for due diligence, and ultimately close the sale. Below is a more detailed description of each of these five stages:
- The valuation stage
- The preparation stage
- The offers stage
- The due diligence stage
- The closing stage
The Valuation Stage
As discussed, a market-based valuation is the first step to selling your structural metal product manufacturing company. You can plan your sales strategy accordingly. For example, there may be simple ways to improve your company’s value, such as by organizing your bookkeeping and improving business operations. If you are happy with your value, then you can feel comfortable moving forward with the sale as soon as possible.
The Preparation Stage
You will then need to prepare your company documents. This will save you time later in the process, especially during the due diligence stage when the buyer requests certain information to verify the details and performance of your company. Here is an overview of some of the documents you may need to collect during the preparation stage:
- Financial documents – This can include tax returns, profit and loss (P&L) statements, cash flow statements, and balance sheets
- Legal documents – Patents, trademarks, copyrights, lawsuit history, and business licenses
- Operational documents – Asset lists, lists of equipment, employee lists, supplier lists, and customer lists
You should also establish your plan after you sell your company. For example, do you plan to retire or are you interested in other business ventures? Also, what is your vision for the company? This may influence the buyer you ultimately choose.
The Offer Stage
Your business broker should protect the confidentiality of the sale. This is most important during the offers stage. To protect the privacy of the sale, your business broker must utilize a NDA “non-disclosure agreement” and “confidential information memorandums” (CIMs) that protect your most privileged information.
The broker may utilize private databases, connections, contacts, and networks to leverage offers. They will also screen the offers and filter out buyers who are not in a position to realistically purchase your company. For example, if they have no experience within the metal product manufacturing company and need heavy involvement from you to take over business operations, then they may be filtered out if you prefer not to be active in the training process.
Your broker will also negotiate on your behalf and facilitate a deal that meets your terms (both non-financial and financial terms). Once a deal is in place, the buyer will sign a letter of intent (LOI) that establishes their intention to purchase your manufacturing company at the purchase price agreed upon.
The Due Diligence Stage
Due diligence is an opportunity for the buyer to review your company’s information. Their goal is to verify that what you presented during offers and negotiations is accurate and consistent. Specifically, the buyer may request the following during due diligence:
- Company documents, such as those that you gathered in the preparation stage
- A visit to your structural metal product manufacturing facilities, warehouses, offices, etc.
- A meeting with yourself and other top members of the company
- A meeting with the top customer (if they make up a large portion of your sales)
- Answers to a multitude of questions that allow them to gather more information
Your business broker should guide the due diligence process. Although the buyer should have every opportunity to review your company so that they feel comfortable and prepared moving forward with closing, it should be entirely open-ended to the point where it takes multiple months. Your broker should ensure the process moves along quickly.
The Closing Stage
The closing meeting can be scheduled as soon as due diligence is complete. This could take place in person, although in most cases post Covid a virtual closing is the most common. Much of the details have been ironed out by this point, and the buyer may have already placed the payment into escrow. Both parties will review and sign the purchase agreement during closing.
Afterward, the escrow agent releases the funds. The seller then must update the company ownership information, provide the buyer with access to all facilities, equipment, etc., and notify employees, suppliers, and customers about the change in ownership. Of course, you may also have to be involved with training the new ownership after the scale is complete. It may help to prepare your staff for this before you officially sell. Ideally, you should have a minimum role in daily operations, aside from overseeing and managing the staff.
Start your Sales Journey with an Accurate Business Valuation
Selling your structural metal product manufacturing business can be both a daunting and rewarding journey. Navigating today’s complex market can feel almost impossible. At Sigma Mergers and Acquisitions, we can help you take the first step with a comprehensive business valuation. And if you choose to list with us, the valuation is completely free.
Our Dallas business brokers serve a wide range of industries and provide accurate valuations to businesses across all 50 states. If your structural metal product manufacturing company generates at least $1 million in revenue and is located in one of the states we serve, our experienced team is ready to discuss how we can support you as your trusted business broker.
With our proven Sigma DealMap™ process, we confidently guide you through every step of the sale and work to sell your structural metal product manufacturing business for maximum value. When you’re ready to sell, trust Sigma Mergers and Acquisitions to deliver results that meet your goals and exceed your expectations.
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.
Feel free to reach out!
