Flight traffic is returning to pre-pandemic levels, and the aerospace industry is seeing sizeable growth. Consequently, aircraft manufacturing is a profitable industry with excellent growth potential. This may mean now is the time to sell your aircraft manufacturing company as valuations are rising. The following review provides insights into how you can sell an aircraft manufacturing company with the assistance of a business broker.
About The Aircraft Manufacturing Industry
Aircraft manufacturing, or aerospace manufacturing, involves the production of aircraft engines and engine parts, among other notable business models. The most common business models (according to Business Reference Guide) include:
- Manufacturing aircraft engines and engine parts
- Developing and making prototypes of aircraft engines and engine parts
- Aircraft propulsion systems conversion
- Aircraft propulsion systems overhaul and rebuilding
The aircraft manufacturing industry includes original equipment manufacturers (OEM) suppliers, value-added resellers (VAR), and subcontractors. There is a high capital expense and a high expense for engineering. Large conglomerates dominate a fair portion of the market. However, many smaller players have carved a valuable niche within the aircraft manufacturing industry. For established companies, there is very little competition.
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Step 1: Determine The Value of Your Aircraft Manufacturing Company
There are different purposes for valuations. If you are selling your stake in the company (or the entire company if you are the sole owner), then you need a valuation as a part of your exit strategy. For this purpose, your goal is to determine the fair market value — the amount prospective buyers are willing to pay for your company.
The most common way this value is determined is via acquisition multiples (rule of thumb data). This takes the averages for industry sales data, along with the financial information of your company. Most commonly, this includes the seller’s discretionary earnings (SDE), earnings before interest, taxes, depreciation, and amortization (EBITDA), gross profit, and net sales. Here are the acquisition multiples for the aircraft manufacturing industry:
- Aircraft manufacturing companies sold for approximately 5.20 times the company’s gross sales
- Aircraft manufacturing companies sold for approximately 0.89 times the annual net sales
- Aircraft manufacturing companies sold for approximately 10.20 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
Most aircraft manufacturing companies generate more than $5 million in net sales, so the data is primarily for companies above this earning threshold. There is not enough data to determine acquisition multiples below $5 million in net sales.
Step 2: Determine If and When to Sell Your Company
The decision to sell your aircraft manufacturing company is a huge one. You want to ensure the time is right before you do so to better meet all the goals you have for your organization after you leave. Your business broker can help you decide if the time is right to reach your goals on the market. If not, they can advise on the best time to list it. Keep in mind, the best decision is not always to go to market immediately. In some cases, it is better to wait several weeks or months before listing. Of course, your goals play a role as well. For instance, if you are ready to retire, it may be best to list as soon as possible. If you are in a position to exercise more patience, then waiting may be the better play.
Step 3: Allow Your Business Broker to Find You Qualified Buyers
This is one of the primary reasons you work with a business broker; they do the hard work for you. This includes advertising your company in front of hundreds of potential buyers, screening them to ensure they are qualified, and guiding you through the decision-making process as to which prospective buyer is the best one to take the reins of your company. Negotiations are common during this stage as well.
Step 4: The Buyer Signs a Letter of Intent (LOI) and Due Diligence Begins
A letter of intent sets the purchase process into motion. The LOI clarifies the buyer’s intent to purchase your aircraft manufacturing company; provisions are usually included in the LOI as well. After the document is signed, the due diligence process begins. Due diligence is the process after the LOI is signed and before closing the sale. During this stage, the buyer can ask questions, request documents, verify details about the business, and have their lawyers review all information. Your business broker should help you implement a strategy to minimize the time it takes to complete the due diligence stage while also ensuring transparency.
Step 5: Closing: Final Signatures and Confirm The Payment is Sent
After due diligence, you can schedule the closing. This is to attain all of the final signatures, confirm that the payment is sent, and start transferring your aircraft manufacturing company over to the buyer. Your attorney and the seller’s attorney are usually present during closing (either virtually or physically). The business is transferred to the buyer to complete the process. This involves providing them with the needed access and information, notifying your existing clients and employees, and more.
Get Started With a Free Business Valuation
Sigma Mergers and Acquisitions helps aircraft manufacturing companies sell for fair market value. We start the process with a free business valuation to help you decide if and when you should sell. Here at our business brokerage, we also offer expert consultancy and guide you through every stage of the process. So, why wait? Contact us today and schedule a consultation and a free business valuation.
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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