Punching Out! What’s Special About Your Business?

Before selling a business, it is important to understand why someone would want to buy it. The concept is similar to why customers buy your products or services, but a little different. A plain vanilla, me-too business or product is not easy to sell. To help sell your business to buyers, or to sell your products and services to customers, it is a good idea to find out what is special about your business. It is also important to know how to communicate what's special.

Whether the competition is across the ocean or down the street, there are reasons why customers buy from your company. Everybody says they have great customer service, delivery times, and quality, but how does the company really compare to the competition? What are the concrete metrics that you use to judge your own performance, such as key performance indicators (KPIs)? It is important to measure the right criteria, measure improvements over time, and constantly work to improve those KPIs.

If your company did not have something special, you would already be out of business. Most likely, you, the owner, are special in several ways. However, unless you plan to stay with the business, the buyer cannot acquire you for very long. Successful owners usually have put together a strong team and have learned to delegate responsibilities to that team. Having a strong team makes the business much more attractive for a buyer.

All companies and sectors in the U.S. are suffering from a labor shortage, but some companies can attract employees better than others. Think about what makes your company culture more attractive than the next. Buyers will worry that your team and staff may not adapt to change, that they lack energy, or cannot be innovative. It is not easy to define company culture, but try to find out what is positive about your company’s culture and make improvements while you can.

Again, our customers buy from your company for a reason. If the company is not special now, it is possible that the company was special in the past, but things may have not changed in 20 years. Some companies have incredible customer lists with plenty of blue-chip customers, but it turns out that most of the designs are legacy products. Eventually, the customers will not be too lazy to go somewhere else. Buyers of the company will be afraid that an acquisition will give customers the excuse to look somewhere else. Once you find the specific reasons why customers buy from your company, you can articulate that better into a sales message for your organization. Buyers will pay more for companies that have a clear market advantage.

There is a lot of very old, used equipment in both the PCB and PCBA sectors, but the tide has been turning for a while. Growing companies in these sectors have lots of new equipment in the right places and are using that equipment to push the envelope on new technology. Some companies are able to use old equipment, duct tape, and bubble gum to manufacture high-end products, but that situation will not last forever. If your maintenance person is the most important employee in the company, it is probably time to start investing in new (or newish used or refurbished) equipment.

New equipment is a means to becoming more efficient and implementing new technology. Your customers should look to you to assist with the implementation of new technology and designs. The company should be able to point to several examples in which you helped customers with design issues using unique technology.

Business owners often complain about price competition; however, growing companies that have unique technology can charge premium prices. To receive a premium for both the company’s products and for the sale of the company, learn to articulate what is so special about the company. A clear, strong message is easier to communicate and will help the organization grow.

As an M&A advisory firm, our job is to find out what is special about the company and relay that message to potential buyers. Sometimes, we think we know what’s special, but we find out later from a buyer that a certain aspect of the business is truly special that neither the owner nor we had considered. At times, the business can be a special strategic fit for a buyer, but no one outside of the buyer's business would have known that. Admittedly, understanding what is truly special about a company is not always an easy task.

In general, we find that growing companies know what is special about the business and continuously work to improve the company's competitive advantages. What is special today will be ho-hum tomorrow, so an owner must keep working at it. Neither customers nor buyers want to have to work to figure out what is special about the business, so being able to clearly articulate what is special will help the company to grow and attract strong offers when it is time to sell.

Tom Kastner is the president of GP Ventures, an M&A advisory services firm focused on the tech and electronics industries. He is a registered representative of StillPoint Capital, LLC—a Tampa, Florida member of FINRA and SIPC—and securities transactions are conducted through it. StillPoint Capital is not affiliated with GP Ventures.

Back

2019

Punching Out! What’s Special About Your Business?

04-29-2019

To help sell your business to buyers, or to sell your products and services to customers, it is a good idea to find out what is special about your business. It is also important to know how to communicate what's special. Read on to find out how you really compare to the competition, and what concrete metrics and KPIs you can use to judge your own performance.

View Story

Punching Out! Getting to a Signed Letter of Intent

03-28-2019

The letter of intent (LOI) serves as a roadmap for the buyer’s attorney to begin drafting the purchase agreement, so it is important that there are enough details in the agreement. Any major terms that are important to the parties should be included. Here's a list of the very important items in the LOI.

View Story

Punching Out! Why Sell to a Private Equity Group?

02-27-2019

One category of buyers that is often overlooked is private equity groups. PCB/PCBA owners either think that their company would not be of interest to a non-strategic buyer, or they have a negative impression of financial buyers. Here are six reasons why companies should consider selling to a private equity group.

View Story

Punching Out! Beware of Cultural Issues in M&A Deals

01-28-2019

Company culture is hard to define and manage, but it is a critical factor in making an M&A deal successful. It is also often ignored or misunderstood during and after due diligence because culture is a "soft" science instead of a "hard" subject like finances, legal contracts, IP, or accounts receivable, among other things, which makes culture a difficult factor to deal with.

View Story

Punching Out! Creating PCB Industry Giants and Mid-majors Through Acquisitions

01-03-2019

Summit Interconnect announced the acquisition of Streamline Circuits. Summit itself was created in 2016 through the merger of KCA and Marcel, and is backed by a private equity firm. In the PCB and PCBA industry, TTM Technologies is the giant King Kong of acquisitions, growing from just $80 million in revenues 20 years ago to over $3 billion today.

View Story
Back

2018

Punching Out! Avoid Surprises During the M&A Process

11-27-2018

No one likes surprises, especially in merger and acquisitions (M&A) deals; there are enough unknown variables to start with. As the deal progresses, tensions start to rise, so any additional variables can cause a disproportionate response. Below are some ways to avoid surprises, and how to deal with them when they come up.

View Story

Punching Out! How to Avoid Key-Person Risk

09-06-2018

PCB West 2018 is next week in Santa Clara, California (September 11–13). Can you go to the show and visit a winery or two without your shop falling apart? Have you taken a vacation in the past few years? Can you afford to not do board rework on a holiday weekend, like this past Labor Day? If you answered “no” to any of these questions, you may have key-person risk.

View Story

Punching Out! Beware of Customer Concentration Risk

08-08-2018

One of the biggest risks in M&A is customer concentration risk. It is hard to avoid as a business owner; if a customer is giving you orders, you generally take them! The next thing you know, your customer has 90% of your sales and they own you. We see this a lot in both the PCB and contract manufacturing industries.

View Story

Punching Out! Dealing with Family Businesses

06-28-2018

Some families may have spent this past Father’s Day discussing family business issues, including when, how or whether to pass the baton. There are several issues to consider when dealing with a family business.

View Story

Fact or Myth: Do 80% of M&A Deals Fail?

05-09-2018

We are often asked by business owners if the commonly quoted figure is true that 80% of mergers fail to meet expectations after closing. There is a fair amount of research on large ($1 billion+), public deals that suggests that the 80% post-closing failure rate may be true.

View Story

How to Prepare for a Smooth Post-M&A Deal Transition

04-05-2018

Selling a company is an exciting process, as well as time-consuming, stressful, and complex. Both sellers and buyers are sometimes so caught up in the deal that they forget to properly plan the post-deal integration.

View Story

Cross Border Deals: What to Look for and How to Manage

02-22-2018

My firm has been approached by foreign firms several times this year and in 2017 who want to acquire PCB, PCBA, or other electronics companies in North America.

View Story

Punching Out! Top 10 M&A Deal Killers

01-25-2018

I am often asked about some of the reasons why M&A deals die. Although this is a very painful subject, hopefully through sharing these reasons we can help some deals survive the M&A process. Here are my top 10 M&A deal killers (and some of the solutions).

View Story
Back

2017

Punching Out! Survey on State of the North American PCB M&A Market

12-29-2017

Recently, my firm surveyed about 20 PCB manufacturers in North America with an estimated greater than $10 million in revenue. Quite a few replied, and we have spoken with many others throughout the year, which gives us a good view on the state of the PCB market. If I did not contact your shop recently, it is because we already talked within the last 12 months.

View Story

Punching Out!: PCB/PCBA M&A Top 10 FAQs

11-13-2017

We talk with owners a lot about the possible sale of their businesses. Here are the top 10 questions asked by PCB/PCBA shop owners about the process.

View Story

Punching Out! Case Study—Lessons on a Deal

10-19-2017

This is a story of one of our clients, a U.S. contract manufacturer that sold a few years ago. To maintain confidentiality, the names have been changed and the details slightly modified.

View Story

Punching Out! Making the Process Easy (M&A Process Engineering)

09-06-2017

In the M&A world, there are companies that make it easy (or at least easier) and those that make it difficult. By making the process easier, sellers should see better valuations and terms, and have a smoother deal process.

View Story

Punching Out! Bridging the Valuation Gap Between Buyer and Seller

06-13-2017

PCB acquisitions in the U.S. are down so far in the first five months of 2017, with only two announced deals (HT Global Circuits’ acquisition of Pho-Tronics in April; American Standard Circuits’ acquisition of Camtech in May); and one anonymous deal that I am aware of that has not been announced. This compares with 11 announced deals in 2016. There are a variety of reasons for the decline, but one reason could certainly be the valuation gap between buyer and seller.

View Story

Punching Out! How to Put a Wrench in the Rumor Mill During the Sale of a Company

05-23-2017

When selling a house, the owner’s agent puts a sign in the front yard, posts info on the Web, and invites buyers over for an open house. When selling a car, we put a sign on the windshield and take out an ad with our phone number on it. However, when selling a business, some owners do not even tell their spouses.

View Story

Punching Out! Selling a Company—Seeing it as a Triumph, Not a Defeat

04-25-2017

Somehow, there is a still a stigma that selling a company is a negative for the owner. Many people think that there must be something wrong, otherwise, they would not be selling. In reality, exiting a business should be looked at as a triumph for the owner, not a defeat.

View Story

Punching Out! 10 Ways to Increase the Value of Your PCB/PCBA Shop

03-22-2017

I have worked with a wide range of companies in the PCB, PCBA, and other tech and electronics sectors. Through the years, I have developed some ideas on how companies can improve their valuation. Some of these ideas are simple and involve little cost, other ideas are more long-term and involve more effort or investment.

View Story

Punching Out! When Should I Call an Investment Banker?

02-20-2017

The quick answer is ASAP. Even if you are not considering the sale of the company for 5−10 years, it is best to be educated and prepared. Give your advisor (or a few advisors) a call to discuss what can be done to get the company ready for a future sale. The worst time to call an i-banker or business broker is when you are forced to sell due to poor performance, health issues, pending bankruptcy, or dispute with a partner or manager.

View Story

Punching Out! Types of Company Buyers in the PCB and EMS Sectors

01-09-2017

Mergers and acquisitions in the U.S. PCB sector have been in the news recently, with at least 12 deals completed over the past year, and several more in the works. In contrast, the EMS sector has been relatively quiet, but that may change now that the presidential election is over.

View Story
Back

2016

War Stories from the Front Lines of Deal-Making

09-16-2016

Here are some war stories from my experience in working on M&A deals in the PCB, EMS, and electronics fields. The names and details have been changed to protect the innocent.

View Story

Timing: When is the Best Time to Sell?

08-18-2016

A few of the top questions we receive relate to the timing of the sale of a business. The first is, "Is now a good time?" The second one is, "How are market conditions?" These are the top FAQs.

View Story

The PCB Sector—What Buyers Look for and Recent Deals

07-14-2016

The past few months have seen a rash of PCB deals in North America, for a variety of reasons.

View Story

What the Heck is Adjusted EBITDA?

06-07-2016

If you are looking to sell or buy a business, you will most likely come across the term ‘adjusted EBITDA.’ Other common terms are adjusted cash flow, owner’s discretionary earnings, earnings after add-backs, etc. What do these terms mean, and why are they important?

View Story

The Additive Process: Tips on How to Buy a Board Shop or Assembly House

05-14-2016

One of the quickest ways to grow a business is to acquire another business. At the same time, acquiring a business can be risky, and a really bad deal may put your original business in jeopardy. Here are some tips on how to make acquisitions.

View Story

Your Baby’s Ugly, Now Get Over it (How to Work with Buyers)

04-14-2016

Here’s a scenario: An owner has gone to market and is starting to get feedback from buyers, and shockingly, not everyone appreciates the hard work and achievements that went into the business. Buyers may not understand the business, or they may be trying to position things for a low offer. In any case, it is important to know how to work with buyers.

View Story

Putting Together the Deal Team

03-21-2016

When preparing to sell, remember the old saying, “He who represents himself has a fool for a client.” While many owners might be tempted to go it alone, in my experience it pays to have a deal team to help prepare a company (and the owner) for a sale

View Story

Punching Out: How to Sell Your PCB/Assembly Shop

02-04-2016

You are thinking of selling your PCB or assembly shop. Perhaps you are contemplating retirement, you have no successors, and the thought of going to the office on Monday is driving you crazy. This column is designed to help your planning efforts. Future columns will go deeper into each subject

View Story
Copyright © 2019 I-Connect007. All rights reserved.