Iron and steel manufacturing companies play an integral role in numerous sectors, and there is a fair amount of demand for established companies. If you are considering selling your iron and steel manufacturing company, then this guide should help you prepare and gain an understanding of what to expect throughout the sales journey.
About The Iron and Steel Manufacturing Industry
Iron and steel manufacturing is a large industry that comprises numerous business types. According to Business Reference Guide, companies within the industry primarily engage in the direct reduction of iron ore, the manufacturing of pig iron (in molten or solid form), the conversion of pig iron into steel, making steel, and manufacturing shapes from steel (i.e. bar, plate, rod, etc.). Of course, many organizations conduct multiple steel manufacturing processes.
Despite extreme volatility in the iron and steel industry, there is some optimism and a fair amount of demand for owners who are interested in selling. Import competition is expected to decline, which bodes well for domestic producers. If the car industry recovers as many anticipate, then the iron and steel industry could also see excellent growth. Here are the most recent industry numbers and projections:
- There are approximately 437 iron and steel manufacturing companies in the U.S.
- There was a 0.3% annual growth for the iron and steel manufacturing industry from 2018 to 2023
- The Iron and steel manufacturing industry generates $101 billion in annual revenue
- The annual profit for the Iron and steel manufacturing industry is $7.6 billion
- Experts predict a decline in annual growth (-0.9%) from 2023 to 2028
How Much is My Iron and Steel Manufacturing Company Worth?
Your goal as the seller is to maximize the sale price (along with meeting your other sales goals). To do so, you need to be able to justify your asking price. A market-based valuation allows you to do precisely that. In a market approach, your broker reviews recent sales data and apples your SDE (and other financial measures) to the following rule of thumb data:
- Iron and steel manufacturing companies sold between 2.73 and 3.61 times the gross profit
- Iron and steel manufacturing companies sold between 0.35 and 1.13 times the annual net sales
Non-financial considerations such as your location, growth potential, unique competitive advantage, reputation, the quality of your workforce, and your reason for selling also play a role in determining the worth of your iron and steel manufacturing company.
Also, timing the sale is crucial to ensure you receive fair market value. In other words, you want to strike while the iron is hot. A professional valuation helps you determine the best time to list your company.
How Can I Sell My Iron and Steel Manufacturing Company?
We break the sales process down into steps. This helps you stay on track and avoid missing key parts of the sales process. Although we recommend a personalized strategy with a professional business broker, the sales process for iron and steel manufacturing company owners typically involves the following steps:
- Find a buyer
- Complete due diligence
Phase 1: Plan
The sale of an iron and steel manufacturing company requires substantial planning. First, you should receive a professional valuation (see above). This gives you an accurate depiction of how much your company is worth on the market and helps you set your asking price. Also, you should decide what is important to you (your sales goals).
For instance, you may feel it is important to find a buyer who understands the industry and has experience with iron and steel manufacturing as it will allow you to be less involved with the transition. You, along with your broker, should also plan your sales approach. This includes when you list your company for sale, how you will market and advertise your company in a confidential manner, and how much wiggle room you have during negotiations.
Phase 2: Prepare
You then need to prepare. Most importantly, you should collect any documents you may need later (if you have not done so already). This includes:
- Legal documents such as business licenses, patents, and more. Essentially, any document you need to legally operate you should collect.
- Financial documents such as three years of your federal tax returns, profit and loss (P&L) statements, cash flow statements, balance sheets, and more
- Operational documents such as employee lists and records, insurance policy, lease information, operation procedures, inventory lists, and more.
Phase 3: Find a Buyer
If you work with a business broker, then they will handle many of the complexities involved with marketing. Most importantly, they will help you find a buyer who meets your sales goals in a confidential manner. This usually involves the creation of a sales memorandum, a confidential document that requires prospective buyers to sign a non-disclosure agreement (NDA). Your broker can help you screen offers, negotiate, and ultimately secure a deal with a buyer who meets the sale goals and makes a fair market offer for your iron and steel manufacturing company.
Phase 4: Complete Due Diligence
Due diligence is a way for the buyer to ensure they are comfortable moving forward with the purchase. Remember, they have already signed a letter of intent (LOI), so the deal should move to closing relatively quickly so long as there are no major discrepancies or disputes. During this phase, you will need to provide the documents you arranged in phase 2, along with providing other details about your business. The buyer may also request to visit your iron and steel manufacturing company and review daily operations as well.
Phase 5: Close
The closing process is relatively straightforward. However, you should properly prepare and know what to expect to reduce the risk of setbacks. Notably, the closing visit usually involves the following:
- You (and your lawyer) review the purchase agreement
- You and the buyer (and all other involved parties) sign the purchase agreement
- The buyer sends the payment according to the terms in the purchase agreement
- You confirm that you have received the payment
- You start the transition of your company, which may involve updating legal information, notifying employees, and providing access to all manufacturing facilities
Start Your Sales Journey With Sigma Mergers and Acquisition
Sigma Mergers and Acquisitions offers free, no-obligation business valuations for owners who are planning their exit strategy. Additionally, through our consultancy and brokerage services, you can plan your sale and execute your strategy in a more effective and stress-free manner. So, why wait? Contact us today to get started.