The mature manufacturing sector is distinguished by moderate competition and consistent growth. The industry’s participants rely on long-standing relationships with suppliers and customers. Additionally, during a sale transaction, valuation may be impacted by effective working capital management and product differentiation. BB Capital, the top private market M&A advisory firm in Saudi Arabia, is aware that selling a company is a significant choice. A committed business owner aims to sell their company to a qualified buyer who can carry on the company’s legacy in addition to maximizing the amount of money they can get from the sale. With more than 100 valuation and M&A advising assignments in the manufacturing industry under its belt, BB Capital brings a wealth of deal-negotiating expertise to the table. Our knowledgeable advisory staff will help your company through the whole sell-side M&A process.

Understanding certain crucial elements unique to the manufacturing industry that could affect the possibility of a possible sale is crucial for entrepreneurs and business owners considering a possible sale. These elements influence how appealing a company is to possible investors and buyers.

Contracts and Agreements: Exclusive contracts or long-term agreements with clients help businesses that produce commoditized goods with little room for product uniqueness build a moat around themselves and fend off competition. Because there is less perceived risk, these contracts increase a company’s appeal to buyers.

Working Capital and Supply Chain: It is crucial for all manufacturers to keep enough working capital on hand to cover their immediate operational requirements. Delivery delays and lost sales opportunities are frequently caused by supply shortages. By keeping a diverse network of primary and backup suppliers that the company can rely on in times of disruption, this can be lessened.

The danger of significant supply chain disruptions can be decreased by having a geographically distributed supply network that is not heavily reliant on any one provider. Furthermore, inventory monitoring systems can be used to monitor available inventory and make more informed budgetary and purchasing decisions. In addition to improving operational efficiency, this can lower the risk of inventory write-down losses brought on by outdated inventories.

Product Portfolio and Scope: Businesses with a larger range of products or services are typically regarded as more appealing. Additionally, systemic risks related to industry performance are decreased when reliance on any one industry vertical is reduced. Businesses with a larger range of products can frequently take advantage of cross-industry pollination and economies of scale.

Capex and machinery: The manufacturing industry requires a lot of money. Delivery delays and excessive maintenance expenses can result from equipment faults and breakdowns. In severe cases, this may even result in lost sales, harm to one’s reputation, and a loss of clients as a result of the inability to perform. To meet short-term capital obligations, a business must always have adequate liquidity. Making sure the new buyer won’t need to make large capital expenditures after taking over the company is crucial during a sale. Additionally, because of growth prospects, businesses with sufficient manufacturing capacity to satisfy rising demand and sales orders are entitled to a greater multiple.

Whether it’s a sale or a valuation, our team can offer resources and experience that are only available at larger companies, together with the individualized attention of our M&A Advisory team. Reach out to one of our advisors by contacting us right now.