Essential tips to execute an M&A deal with a manufacturing firm

The UK manufacturing sector continues its revival, enjoying strongest annual growth for more than three years.

The manufacturing sector was one of the worst affected by the economic downturn and is still 7 per cent below its pre-downturn peak in early 2008. However, there is a feeling of optimism in the sector with analysts predicting continued growth this year.

This optimism together with the growing “re-shoring” trend in the UK (which is seeing manufacturers bringing production back to the UK to develop “home-grown” quality manufactured products) is likely to lead to increased M&A activity in the sector.

According to a recent survey carried out by Deloitte, 73% of UK listed manufacturing and industrial companies are expecting a rise in M&A activity over the next 12 months.

Here is our guide to positioning a manufacturing business for a future sale:

Package your business to make it ready for market
The risk of a deal falling over is present in every M&A deal. Good advisers will minimise this risk for you, but, a proactive approach (started well in advance of any sale process) to prepare the business for sale is the best way to reduce risk.

In our experience the key areas to focus on are:

  • Solid and robust financial reporting procedures based on well-prepared and reliable management accounts and cash flows;
  • Realistic forecasts you will give a buyer confidence in your future predictions if you can show that you have a track record of achieving your forecasts in previous years;
  • Water-tight compliance make sure early in the process that your standard terms and conditions of sale, employment contracts, regulatory compliance, corporate governance, data protection and intellectual property protections are in good order before the buyer commences due diligence.
Pre-sale marketing/profile raising
Corporate finance advisors will market your business to prospective buyers. They will issue marketing documents known as a teaser and then an information memorandum giving the key highlights of your business.

But you can raise the profile of your business in advance of this and any sale process, making your business more attractive to potential buyers. Consider using the press to your advantage in terms of advertising launches of new products, new distribution channels and key contract wins or even sponsoring local business events.

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