At MBS, we hear this question from a client or potential client at least once a week. Although we are experts in all aspects of M&A, we don’t have a crystal ball. The world is too complicated (and uncertain) these days to know for sure the best time to exit. However, there are some guidelines that apply to every business and can help owners decide for themselves when the time is right to sell their plastics company.
FIRST, make sure you have a good management team in place. Buyers know that the former owner will leave at some point. In fact, even though an owner agrees to stay on-board for a period of time, they can change their minds and leave immediately. A buyer wants an executive team, in place that can run the business in a pinch.
SECOND, if at all possible (and sometimes it is not), make sure your business is doing well at the present time AND that the next year looks strong, as well. All owners want to sell at the TOP of the business cycle (After all, who doesn’t?) but buyers are smart and will want to look at the future too. If last year was a bad year, they will want to know why and make sure that is not likely to happen again. Buyers want to see a bright future for the business, so the 1-2 year outlook is vitally important.
THIRD, make sure your “curb appeal” is as good as it can be. If you have been planning to replace the 1970’s wallpaper in the conference room, do it before you put the company on the market. First impressions are important.
FOURTH, figure how much longer you want to work and “back into” a date to sell. Buyers will prefer that the owner stay for some period of time – usually two or three years. The process of selling the business can take a year. If you want to be out in two years, NOW is the time to sell. If you would like to be out in five years, you have another year or two to get ready.
FIFTH, make sure you have a good team of advisors in place to help you get the deal done. Although we will help you through the entire process; you will need a good, experienced M&A attorney, a good tax accountant and solid help from an outside CPA firm. If you don’t have any one of these necessary resources, we can make recommendations. We have worked with hundreds of these professionals and have strong relationships with many of them.
And Lastly, there is no absolute perfect time to sell a plastic processing business. There are times when the market is good. There are times when your business is strong. There are times when the banking climate is robust. And there are probably times when you would probably LIKE to be done with the business. If we are very, very lucky, all of those times MAY line up – but likely not. In the end, WHEN YOU ARE READY, we are ready.
by Terry Minnick