The aluminum smelting industry is unique and filled with excellent earning potential, which attracts the attention of many prospective buyers. This guide reviews the process of selling an aluminum smelting company, along with insights into determining the worth of your company.
About The Aluminum Smelting Industry
Billets, blooms, and ingots are made by aluminum smelting machinery and processes. The aluminum smelting industry involves the recovery of aluminum and aluminum alloys (from scraps and dross). It also includes the production of manufactured alloys, powders, pastes, and more from purchased aluminum. In particular, machinery companies dominate the aluminum smelting industry. This is a highly specialized market. For established vendors, there is great value in the company due to the high barrier of entry.
How Much Are Aluminum Smelting Companies Worth?
Aluminum smelting companies often receive excellent valuations relative to their profitability. Rule of thumbs, also called acquisition multiples, use your company’s SDE, EBITDA, and net profit, along with calculated averages of sales within the industry, to formulate a tentative value for a company within this industry. The acquisition multiples include:
- Aluminum Smelting Companies sold for approximately 2.09 times the Seller’s Discretionary Earnings (SDE)
- Aluminum Smelting Companies sold for approximately .95 times the annual net sales
- Aluminum Smelting Companies sold for approximately 5.60 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
This is exclusively for aluminum smelting companies that have under $1 million in net sales; there is not enough data for larger companies within the industry to establish a rule of thumb. Of course, there are many more factors and valuation methods beyond valuation multiples.
The success of your business operations, the quality of your equipment and machinery, the diversity of your customer base (and the stability and reliability of your customer base), your growth potential, and the quality of your workforce also play a role. The reason for the sale and the urgency at which the sale is required may play a role in determining fair market value for your company.
You should also check: How to Sell an Aviation and Aerospace Company
The Sales Process for Aluminum Smelting Companies
The complexities involved with selling an aluminum smelting company can become overwhelming, which leads many who attempt selling without help from a broker to abandon their efforts. It can help to work with a broker and divide the process into stages. Notably, the sales process for aluminum smelting companies should include these stages:
- Business valuation
- Preparing for the sale
- Finding the right buyer
- Due diligence
- Sale closing
Below is a more in-depth look at each of the five steps you can expect when selling your aluminum smelting company. Of course, your process may look different depending on the specifics of your business. Keep in mind, no two businesses are the same, so there are no cookie-cutter processes for selling.
Stage 1: Business Valuation
Your business valuation is an integral part of your exit strategy. This lets you know if your business is ready to sell and allows you to reach your exit strategy goals. If not, then you can take action to improve its value. If you are happy with your valuation and the current state of the market, then you can proceed to sell.
Stage 2: Prepare for The Sale
Next, prepare all of the documents and information you will need ahead of time. This can reduce the time it takes to complete due diligence and the risk of potential buyers backing out of deals. Notably, your business broker and lawyer may ask for you to collect these documents (among others) during the preparation stage:
- Tax returns
- Profit / loss statements
- Client lists and information
- Internal balance sheets
- Insurance information
- Lease information
Stage 3: Find The Right Buyer
Your business broker should have access to a network of potential buyers for your aluminum smelting company. They can field offers from multiple potential buyers, negotiate terms and contingencies, and secure a letter of intent (LOI) with the buyer that best meets your financial and business-related goals. Additionally, your business broker ensures a confidential sale process so that rumors do not develop regarding the sale of your company (or your stake in the company).
Stage 4: Due Diligence
Due diligence allows the buyer to learn more and verify the provided information. You and your business broker should have a process and timeline for due diligence, rather than allowing for endless requests for more documents that drag on for months.
Stage 5: Sale Closing
After due diligence, you can proceed to schedule a time for closing. This is an exciting time, but the work is not done. Your attorney should be present and hyper-focused to ensure all details in the purchase agreement are accurate. In some cases, your business broker may ask to attend as well to ensure the process goes smoothly. During closing, you will attain final signatures and verify the payment is sent to you.
What are The Benefits of Working With a Business Broker?
A qualified and experienced business broker makes the sales process easy for aluminum smelting companies. From providing a professional valuation to ensuring the sale closing is as smooth as possible, they help with every stage of the sales process. In addition to hands-on services where they actively market your business to potential buyers, they also provide consultancy services so that you can make informed decisions. Here are several key benefits of working with a business broker:
- A confidential sales process
- Professional negotiation skills
- Access to a network of potential buyers
- A personalized sales strategy
Of course, not all business brokers are the same. You want to ensure that you choose an experienced broker you can trust. You also want to choose one that understands your story and considers the unique value of your organization, which may go beyond simply looking at financial records to formulate your valuation.
Speak With a Business Broker and Receive a Free Valuation
As discussed, the easiest way to sell an aluminum smelting company is to have a trusted, proven business broker on your side. Here at Mergers and Acquisitions, we have helped more than 600 businesses sell at or above fair market value. If you are interested, you can get started with a free, no-obligation 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.
Feel free to reach out!