Building Intrinsic Value: M&A Insights for Manufacturers

“The best time to really sell is not when you need to sell. It’s when you’re ready to sell.” — Dave Sheppard, Managing Director, Med World Advisors

Are you looking to increase your manufacturing business’s intrinsic value and prepare for a successful company sale? In this episode of Moore on Manufacturing, M&A expert Dave Sheppard from Med World Advisors joins Mike Sibley and Kevin Golden of the James Moore manufacturing team to break down what it really takes to position your business for maximum value. Whether you’re planning to sell next year or decades from now.

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Full Transcript

[00:01] Mike Sibley: Hey, I’m Mike Sibley, leader of the James Moore manufacturing team. I’m here with Kevin Golden, one of my partners and also a member of the James Moore manufacturing team. We are excited to have Med World Advisors Managing Director Dave Sheppard with us on the show today. Med World Advisors is an M&A firm that specializes in helping small to medium-sized—and probably larger now—medical device and other medical-related companies with the buy and sell process. So Dave, welcome to the show. Glad to have you on again.

[00:34] Dave Sheppard: Thank you, Mike, for having me. Looking forward to the discussion today with you and Kevin.

[00:38] Mike Sibley: I think we’re going to have a good one today. A couple weeks back, Dave and I were actually on a panel at the Florida Medical Manufacturers Consortium’s 18th annual symposium, and we spoke about building intrinsic value in your company. While the conference was kind of focused on medtech, all the concepts—pretty much all the concepts—apply to any business, any manufacturer. So we thought it’d be great to take that panel and bring it forward. Dave and his team bring so much expertise. I actually worked with Dave on a client that we jointly helped sell, and their team brought so much value to this process. It seems like they’re always working because I get emails in the middle of the night, and then I talked to Dave and he’s like, “Yeah, I’m actually in Europe getting a deal done.” So they’re just all over the place, all over the world getting things done.

[01:26] Dave Sheppard: You would have had one of those today, although it would have been different because I was up at 4:00 a.m. for one of our European calls. The good news is half of our business these days is in Europe and half is in the US, which makes for a nice balance and also gives you a lot of interesting perspective when you talk about intrinsic value—about the different things that take place around the world in manufacturing companies. Some of them are very similar that are impactful, but they maybe have a greater influence in certain areas than in another region.

[02:07] Mike Sibley: It’s always exciting listening to some of your stories of what works and what doesn’t work. So I’m glad to get your perspective on things. Before we go too far, we did talk about one of the things we started: what is intrinsic value? At the conference, I kind of talked about it as the real value of the business—when you’re dealing with valuations and profitability, discounted cash flows, all that kind of stuff. That’s one aspect of it. But from your perspective as an M&A adviser, what does that mean to you, and how does that sometimes differ in reality? Or maybe it comes to reality when you’re talking about market value versus intrinsic value?

[02:54] Dave Sheppard: Mike, it’s a great question. As you know from our discussion at the Florida Medical Manufacturing group, it’s really near and dear to our heart. A company that thinks about intrinsic value—what they’re really thinking about every day is their stakeholders. They’re thinking about the stakeholders, not just the equity investors in the company, although those are very important. It’s the employees, it’s the vendors, and it’s the customers—anybody involved in the ecosystem of that company. How are you creating the right value for every stakeholder that’s involved? Because when you do that, you’re actually creating an ecosystem for that company that’s going to create value for you today, but also value for the future.

[03:33] For example, if you need to go get a credit line—which I’m sure in your business you get a lot involved with your clients—how do you get that in the right way? It’s important about the value that the bankers might perceive that particular day. In the future, it might be you want to get a larger customer. Well, sometimes the larger customer won’t take you on because they do a lot of research and say, “You don’t really have your stuff together in the right way in certain areas,” and those things matter. A lot of companies—especially OEM suppliers—get audited by big companies, and they’re not ready for it. It hurts their future business.

[04:12] So a lot of these things play into that intrinsic value that not only creates the value today but also for the future. At the right time—what they should be thinking about is at the point that you want to sell, and that could be next year, could be 30 years from now, it doesn’t really matter—you’ll be very well positioned to have the right opportunity to take that intrinsic value and turn it into the market value at the time. You cannot control the market dynamics at any point in time. If any of us had that crystal ball, we’d probably be on a beach somewhere right now.

[04:46] Mike Sibley: Absolutely. I kind of look at it—to put it way simple—if you’re doing those things to make yourself more valuable in the future, it’s going to make you a better business now. That also gives you leverage down the road because you’re fundamentally strong, and you’re going into a potential deal in a very strong position—as opposed to being in a weak position where your business isn’t running well, you just need to get out, and you’re just hoping somebody will actually buy it.

[05:18] Dave Sheppard: You go back to the things that people talk about—what’s important in the business that they look at. They look at market opportunity, but one of the top things is team. I don’t care whether it’s a VC talking about a startup or whether it’s a private equity firm talking about taking a middle market company that’s been around for a while. If you actually don’t have that good intrinsic value, people don’t even want to join your team. So then you don’t even have that team to start with. Good people attract good people—even great people.

[05:44] Kevin Golden: Dave, like you said there, that’s exactly what I was thinking. If you think of an ecosystem out in nature, what is it? It’s the right conditions that attract the right people, the right things that want to be a part of that—whether that’s that banker, whether that’s that eventual buyer, whether it’s those team members that want to be a part of somebody who’s got it together. The simplified way of putting it: build the right conditions, then the right bankers, the right employees, the right vendors, the eventual right buyer is going to come along and be attracted and want to be a part of something that is growing, is thriving, and has a future.

[06:35] Dave Sheppard: That’s one of the things that we see over and over again. People ask us, “During this particular scenario, at this point in time, is this a good time? Are people going to be attracted to my company?” Our starting point is: people are always attracted to quality companies. If you’re doing things the right way, they’re always going to have an interest. Now, there are a lot of things that might impact whether in that particular year you’re going to get a certain valuation based upon market trends, cost of capital, all those things. That’s why you want to pay attention to your core business and then talk to advisers like you guys about what’s going on—if you need to get a line of credit or if you want to get some investment. Talk to M&A advisors that are in the market about what valuations and multiples you’re seeing.

[07:18] We see a wide range of multiples even in good times and bad times. A good company even in bad times can get twice the multiple. When you see these industry averages on PitchBook, you have to remember those are just the averages. If you’re a good company, you’re probably going to get more than the average. If you’re not a good company, you’re going to get less than the average. That’s one of the challenges we get sometimes as an M&A adviser—some people aren’t really quite ready, and it’s a good time. “Hey, people are getting 10, 15, 20x multiples.” Yeah, but these companies had that intrinsic value. They’ve got that growth rate, the market opportunity, and it’s the right time, so they’re getting that. But in your case, you just had a flat year, you lost a major customer—yeah, you can get something for your company, your business, because you’ve established something, but you may not get that same above-average market multiple.

[08:21] Kevin Golden: You mentioned “advisor.” That’s used a lot in your role—M&A advisor. You probably get a lot of questions. I know we get questions about, well, what exactly does an M&A advisor do? I’m thinking about—or think I’m ready to sell. You may tell me otherwise, but I think I’m ready to sell or go down that path. So, what would you say an M&A advisor or somebody like yourself does? And when does it make sense to say, “Okay, now someone like Dave or Med World Advisors—it’s time to get them involved”?

[08:48] Dave Sheppard: Thanks, Kevin, for the question. One of our starting points in talking to people that are interested—stakeholders, the equity stakeholders—when they’re thinking about when’s the right time for me to sell, I always tell them the best time to really sell is not when you need to sell. It’s when you’re ready to sell. If you’ve got the time to think about it and be prepared and do it right, you’ll have a much better outcome. If you need to sell, then you need to sell—get a good adviser and we’ll help you get the maximum value while that’s available. We’ll do the best we can with it, and you should do a pretty good job. But if you can time it where you’re ready to sell, then even in a down time, we can actually help you get that above-average multiple.

[09:35] We had a company a couple years ago where the key stakeholder had bought the company about 25 years ago. He had built it up, and now he was 78. He was good, healthy, happy running it, but his family was starting to tell him he needed to slow down a little bit, and his daughter was helping him run the company. Good time to look at it. Because he had time to think about it, he came to us and said, “Hey, can you just tell me where we have strengths and weaknesses in our company?” That was the ideal scenario.

[10:06] So that was in the summer of 2022. We had this whole package that we look at—a business, especially a manufacturing company—and think about all the things that you should have in the right places. We sent them a questionnaire, got their answers, and started talking to them about where you want to be in all these different functional categories and parts of the business. By the time he was getting ready to sell in 2023, he really was ready to sell. We were able to take this company—I think he would have got a good value at any time because he had built a good quality company to start with—but by maximizing each of these functional areas and making sure he was ready to sell, he ended up getting an outcome that wildly exceeded his family’s expectations.

[11:09] Kevin Golden: What you talk about there is readiness. Obviously, he was ready. He had time. I always like to say, whatever you’re doing, whatever you’re planning for, I like having options. Don’t paint yourself in a corner where now it’s “I have to sell” but rather “I’m ready to sell.” Going around that topic of readiness, what do you see as some common pitfalls or misconceptions about what that really means? When someone says, “Yeah, I’m ready to sell. I think I’m ready to go,” and you’re like, “Well, maybe not. Maybe we need to slow down. Maybe we need that time to think about it.” Give people an idea of what some of the common misconceptions are about what that means, and what business owners and manufacturing owners can do now to put themselves in a better position to really be ready to have that conversation.

[11:56] Dave Sheppard: I think probably the strongest misconception is somebody says, “Hey, I really had a good profit last year, so I should be ready to sell.” Well, I see Mike shaking his head because what does profit really mean? You could have a good profit and a really crappy cash flow. You can have a good profit and not have a really good EBITDA. There’s just a lot of things that go into that equation.

[12:17] What you really need to understand is, for the business that you have—and in this case, we’re talking about manufacturing companies—how am I going to be valued? Because if you’re really thinking about getting ready to sell and maximizing the value that you have, you start thinking about these different areas. In one case, we had somebody who really had a great EBITDA. He’s looking at the industry averages and thinking, “Hey, maybe I can even get above average.” But his customer concentration was so high, there was no way that he was ever going to get an above-average multiple. He was actually lucky to get an offer.

[12:59] The offer would not come really so much from private equity. It would come from an industry competitor that wanted to take on that customer concentration. It wasn’t so big to them because they had 10 other customers, and that 11th customer that was big for the smaller company could fit in. But that’s really where the misconceptions come sometimes—you focus on one thing and think, “Okay, I got a good profit. I can now go sell my company.” Well, maybe, but let’s look at the rest of it to make sure.

[13:42] Mike Sibley: The reason I was so vigorously shaking my head is I see that a lot. You almost say, “I had this one great year, so let’s get out.” Here’s the thing: if you’re all of a sudden starting to get back to maybe normal—maybe you had one good year, one customer had one big contract, whatever it might be, but now you’re going back to more your normal range—you’re not getting the full value of that. These buyers are going to come in and probably flatten that out. They’re going to look at where your forecast is going. They’re going to look at a lot of things. I haven’t seen it—maybe you have, Dave—where somebody had one good year, a blip on the screen, and got full value on that blip.

[14:22] Dave Sheppard: That’s another reason why they should hire good advisors like you guys and candidly us. We get deal after deal where private equity firms come in. We pride ourselves on getting above-market multiples for our clients every single time in the last 10 years. But the challenge is it’s not just about letting the buyer come in and take over and say, “Okay, I see your multiple. I’m going to give you this thing.” They always tell you, “I’m going to give you 8 to 10x, that’s the industry average.” Well, you can offer that, but that’s not what you’re going to pay for this company because this company is ready and doesn’t have to sell right now.

[15:02] So it’s really important to understand the leverage that you have when you’re in the situation. That one good year gives you something to talk about—it gets some interest, makes it fun. The good news is, if you’ve had a couple of good years, then you might be able to bank on it if you can show that going forward. That’s what you guys are helpful with—a client’s pro forma. Nobody has a crystal ball, but you can have some reasonable educated guesses about where it’s going based upon where the customers are and that sort of thing. Then you have something that shows consistency that you can really push the buyer on.

[15:39] But these firms, what they’ll do in diligence—they’ll hire Ernst & Young or PwC to do audits, and they’ll ask you here in 2025 for stuff from 2018 and 2019. We just said, “No thank you, that’s not relevant.” If you want this company, 2018, 2019—then you had COVID, nobody can count what happened in COVID—then 2021 started recovery, 2022. So it’s really around 2023, 2024, 2025, and what’s going to happen in 2026, 2027, and the market opportunity and the rest of that intrinsic value. You need people like us to push back on your behalf. Let us be the bad guy and say you’re wasting people’s time if you’re going to focus on what happened in 2017. Yeah.

[16:27] Mike Sibley: I will say you guys do an absolute great job of that. It was great having you part of the team to be able to say, “Listen, they’re getting a little bit out of bounds here. Let’s get everybody on the same page.” You guys do a great job of that.

[16:39] Jumping into the readiness though, I think this is probably one of the most important points in this whole discussion—the transition planning, the planning time. “Hey, I’m ready to go right now.” Well, are you? Because let’s go back to your example of “I’ve now had two good years.” Okay, now I’m starting to feel a little better about two good years. But in due diligence, they’re going to say, “Show me your pipeline. Prove to me that you feel good that we’re going to not only repeat but even improve on this number.” How do you get there? How do you measure a pipeline? How do you get that confidence level? They’re going to really drill you on what the future looks like and how you build into that. So your readiness is not just about having good financial statements and a good IT system and a good team. It’s also showing that we have the ability to continue this growth, and here’s how. I think a lot of times that gets missed in what a company is thinking about.

[17:34] Dave Sheppard: Because it’s nice to get an offer based upon your historicals, but candidly, buyers—they’re not buying your history. It’s giving them confidence there could be a future, but really what they’re buying is the future. They’ll give you a better multiple the more confidence they have in the future. That’s really what this is all about, to your point.

[17:54] Also, in manufacturing companies specifically, it’s not only that continued trajectory in terms of growth due to revenue, but it’s also margin growth. What are you doing to improve even a quarter point on your margins? Because that all falls down to the bottom line.

[18:11] Mike Sibley: Nobody buys anything, nobody invests in a company to see no rate of return. We’ve got to have the ability for EBITDA, for everything, for profitability to increase. Because if not, what are they getting out of it? That’s the goal.

[18:40] Kevin Golden: Even like you said, Dave—as I’m hearing all this, I’m thinking, “Oh my gosh, you’ve got to have all these different data points”—whether it’s profit, cash flow, all these other items. It’s “do all these stars align?” And I’m thinking, well, clearly no company’s perfect. I think that sometimes even helps out as well to say, “Hey, yeah, this was a time period that maybe we did have some struggles, some growing pains.” Here’s how we overcame that, because we can easily tell that story that then shows, “Well, yeah, even through adversity, here’s how they overcame. Here’s how they figured that out. Here’s how they sustained through it.”

[19:09] So I agree with you to some point—we have to make sure that it’s within reason. Going back too far, for example, doesn’t matter. But at the same time, I know we’ve had discussions in due diligence with people buying our clients where they have had a period of time where maybe the stars didn’t all align, but being able to tell that story, being able to show the metrics and what you’ve done—process, procedure, everything—gets back to what you call confidence or that comfort level. That’s what buyers want now. They feel confident: “I can take this on in the future. I can get the return I want, and even more so, I can increase that and make it even more profitable going forward.”

[19:59] Dave Sheppard: Kevin, that’s really a good point. We’re talking about intrinsic value, and we’re trying to create this perception that you need to have everything perfect. You don’t. But you need to understand where it is good and where it’s not, and then have a story around it. “My team might be a little weaker right now in Asia because I just had to fire my Hong Kong distributor because they really weren’t performing. I thought they were going to help me in China, but China’s changed.” But you recognize it and you’re doing it and you’re addressing that. “Here’s how my Asia has been. Here’s where I can go with it.”

[20:24] People understand that every company’s going to have some strengths and weaknesses. The question is, do you understand them? If you can tell the story about where you’re at and where that’s going to go, that just continues to increase the confidence about the future and working together.

[20:48] Mike Sibley: Let’s switch gears a little bit here. I saw an article recently talking about the M&A market with all these tariffs—how it had maybe got a little bit slow or stopped, kind of got put on hold a little bit. But now I guess starting to see some M&A activity rebounding with all the tariff talk. Of course, we just had a tariff thing recently with a court ruling come out here. Things are always in the news about tariffs these days. But I know we kind of said earlier you’re traveling the world seeing deals. What are you seeing in terms of M&A activity?

[21:16] Dave Sheppard: It’s an interesting perspective for us because we’ve actually done deals in Central Europe, Northern Europe, UK—which, I don’t know, is that Europe or not? That’s the debate these days—and then also the US. What we’re seeing right now is, first and foremost, people need to understand that this dry powder everybody’s talked about—it’s still there. People may not be throwing offers on the table this particular quarter ever since Liberation Day on April 2nd.

[21:53] Because what financial people—as you know, because you guys are finance guys and you work with a lot of banks—they love good news. So they’re happy, everybody’s all in on good news, getting a higher return or whatever. They can even deal with bad news because they can pencil it into their formula and figure out, “Okay, if that’s my risk, this bad news, then I can handle that,” and they measure it. Where they really are challenged is the environment of uncertainty.

[22:28] So what we’re seeing right now—as far as companies reaching out to us saying, “Hey Dave, do you have a client that we could buy?”—that activity is as strong as it ever can be. And that doesn’t matter if it’s in Germany, Nordics, UK, US—that is there. What’s not happening is, “Hey, we’re ready to write the check just yet,” because what they don’t know right now until this court thing gets resolved or the July 9th thing gets resolved, whichever comes first or maybe even later—they just need to know, “Okay, are we going to be in this world of 10% tariffs forever? Are we going to be 50%?” Whatever—they can then pencil it in and make decisions.

[23:03] So it’s a little bit more challenging right now for us with our US clients. What’s interesting for us, because we have our European business, is we’re getting a lot more interest from companies that had been thinking about coming to the US, and now they’re wanting to come and find a partner here in the US to work with so that they can—probably in most companies’ strategy, it was already there. Now what they’re doing is accelerating it. That’s the conversation we’re having—how can we help them find a partner in the US to accelerate that? So our European business is actually taking a very positive momentum forward because of that. The US—the activity, the interest is there, but the actual offers are going to probably come into the second half of the year once there gets a little more certainty about what the playground is.

[23:55] Mike Sibley: I’m seeing that actually a lot as I talk to my clients about planning—whether we’re talking about pricing on products, inventory needs, all these different things. There seems to be a common thought process that, “Hey, I think in a few more months or so, all of this will level out.” That it’ll calm down. Maybe some of it will go away. I don’t know to what degree. But I think there’s this sense, and I assume that’s kind of what you’re seeing in the M&A process. “Hey, let’s find something. Let’s get started because this process takes a while anyway.” So maybe by the time we work through all this, it’ll be—is that kind of the sense you’re seeing too?

[24:43] Dave Sheppard: Exactly right. You wouldn’t want to be in a US process where this quarter was a quarter where you had to have your offer. That would have been a challenge. But we did have a situation in the first quarter where we had a European company on the market—international, European company—and we had buyers that were interested from the US, we had buyers from UK, and then also from Europe, giving those above-market-average multiples that we were talking about.

[25:06] Interesting situation about making sure that you’re ready and intrinsic value: the reason why this company decided to go to market was two of their biggest industry competitors reached out to them and said, “Hey, you guys, we’ve kind of been noticing you over there in the corner. You’ve been innovating. We’re not. Your big company—we’re not innovating. You guys are grabbing market share from us. You’re starting to annoy us a little bit. So we want to buy you.”

[25:32] The key equity holder came to me and said, “Hey, Dave, these guys—this is last summer—do you think we should run a process right now?” And I said, “Well, I think so, but let’s look at some things in your business because we need to make sure that you can withstand a full process.” A full process is not just talking to the business unit leader at that big company about what his offer is. It’s about making sure that when you get into diligence—first when you get LOI executed—that you’re not leaving any money on the table. If you don’t need to sell, you want to make sure that you’re not leaving money on the table. So let’s just run a process, see who else might be interested out there.

[26:11] So we went and found out, checked the company out—built quality, ready to sell. We ran the process. In the timing of the process, the two big companies had other major events happening in their company completely unrelated to this company, but both of them backed out because of timing. So if they had just decided to sell because they were going to sell to one of these, they would have been out of the deal.

[26:35] But the reality was we were able to run a process. We had buyers from UK, Europe, and US interested in them in Q1, and things were really going well. Then the tariff stuff was going on, and we were down to final LOI phase the week of Liberation Day—which was a Wednesday. On Monday, we had European interest and US interest. By Friday, we still had that, but the US became a little bit less certain what they wanted to do because of what happened on Wednesday. Now all of a sudden, they don’t really know what was going to happen with their money.

[27:18] The good news was the European company was a little bit stronger to begin with anyway. So then it just made sense—let’s go ahead and consolidate that deal because we’re not sure where the US people are going to be right now. That turned out to be a good thing to do.

[27:34] Now, in the meantime, talking about intrinsic value—so the intrinsic value paid off for them because they withstood the fact that two major strategics backed out, and they got just as good an offer from a private equity company that wants to take them as a platform. But then what’s been going on is international company, international deal—you can imagine there’s a lot of exchange rates going on relative to their business. That’s causing some fluctuation in their performance to budget—not their actual performance, but their performance to budget because of how the exchange rates impact it.

[28:08] What we’ve been going through right now, getting the deal over the finish line—in fact, my 4 a.m. call this morning was reviewing with the buyer, who still is very interested in doing this deal because they see it as a quality company they want to participate with. But they have to get the banker to approve the deal. They’ve got to get their investment committee to approve the deal. The buyers are trying to understand what’s the real story of why we’re not performing to budget.

[28:43] What they were able to actually show is the only delta from their performance was that exchange rate. So now they’re forcing the seller to—I talked to the seller about it—we need to help them understand that you are still who you are. Now, the buyer wants to participate with you because they see what the future can be. Now you’re forcing them to make a decision based upon that. They actually know the story they can tell the banker.

[28:56] They were able to do that very well this morning. So now we’re going back. We’ll see where the final result is. But I have a very high confidence coming out of that meeting that intrinsic value stood up in that review because the only thing that created that delta to performance was the foreign exchange—which the buyer admitted the seller cannot control.

[29:18] Mike Sibley: That’s a great story of how important it is to be working with your advisers, working with everybody to try to get that through. There’s so many pieces in there that show just what it is. But one of the things I always talk about when a client comes to me and they say, “Hey, a big competitor of mine wants to put an offer on our business”—the first thing I always say is, “Well, before we do that, let’s run a process to see. Make sure their offer is in the ballpark, or maybe—if you’re going to sell your business—let’s see if maybe there’s not a better opportunity out there.”

[29:59] Yes, it could be easy, but then again, they could get into it. They learn a bunch about you, and yes, they’ve signed a whole bunch of agreements and NDAs and all that kind of stuff, but they may not want you after that, after they get into it. But if you were really interested in selling, let’s look at this.

[30:22] Dave Sheppard: We had that scenario in that company that I talked about—talked to him in 2022 about getting ready. When we got ready to start the process in 2023, he handed me a business card of a private equity firm that had been chasing him for 20 years. He said, “Hey Dave, I know you’re going to run your process, and I want you to because you’ve convinced me that that’s the way to find out if we’re not leaving money behind. But these guys are going to buy us. I just know it.”

[30:35] Well, we ended up selling that company—I won’t go into the exact amount, but it was over $100 million. And that company that he said was buying him never got over $75 million. That’s why you need to run a process—because the range in that deal was from like $60 million offers to over $110 million offers.

[30:52] A deal that we did in Europe earlier last year—the delta was between $30 million and $70 million. So how do you, as a seller who doesn’t run a process, know—are you getting the $30 million offer or the $70 million offer? You really need to have somebody by your side helping you make sure you understand that you’re not leaving anything behind.

[31:14] Kevin Golden: Such an important point to note there. I think that’s super critical. I’m glad that came up because I think that’s a really critical point.

[31:21] Dave, we’re advisers. You’re an adviser. Attorneys, other close family members, mentors, whoever it may be are advisors to them. With so many different people giving advice—especially, I mean, these are transactions that unless you’re a serial entrepreneur turning over companies constantly, you’re probably doing this maybe one to three times in your lifetime as a business owner. It doesn’t happen every day. So you get all this advice: “Oh, here’s what I would do. Here’s what I’d look at. Hey, we should look at another company.” Kind of knowing where this falls in between—how do you find that juggling between yourself and what you bring to the table, knowing what their other advisers—whether it’s someone like ourselves or someone else—bring to the table? How do you juggle working all that together, coming at it from slightly different angles, to ultimately get to, “Okay, here’s what the best answer is for you, your company, and how we should move forward” during that M&A process?

[32:13] Dave Sheppard: Kevin, that’s an excellent point. We are so excited when we’re working with an equity owner—sometimes a CEO, sometimes a chairman, whoever it might be—that recognizes the value of advisors. Because the more people around the table that actually have been through this before and understand the process, the more value that equity team, those stakeholders, are going to get.

[32:45] Because when I talk to you, Kevin, and you, Mike, and maybe we might talk to John the attorney down the street that we all know—those equity holders are going to get different types of advice because we all come from different functional areas. But they’re going to get similar types of advice that they need to hear, and it’s going to actually help them run a better process.

[33:09] Assuming that you have the right advisors, we’re all going to be able to work together to help create the value, to get the right offers to start with. And then through that diligence process, which really becomes very challenging and cumbersome at times because they’re hiring these PwCs and EYs—and they’re paid to try to figure out what they can find in the closet—we can just help you when things come up. “Yep, that happened, and here’s the explanation. Here’s the story. You don’t have to panic, Mr. Business Owner, that’s trying to sell your business. This is the natural thing. These guys over here at the auditor firms, they’re just paid to find stuff.” So unless you were doing something that was fraudulent, it’s all going to be okay. We’re all working together to tell the same story and making sure they’re prepared to tell the proper story. That’s also helpful for them.

[33:55] Mike Sibley: Obviously, this is what we do—we bring our expertise into it—so it can kind of sound a little bit self-serving. But I’ve worked with Dave and the attorney, for example, that we were just talking about, and we were nights, weekends, holidays, whatever we needed to do with the CEO of the company trying to make sure that we were getting everything going the right way. Because he saw the value of what we brought.

[34:15] Sometimes owners will try to bring us in piecemeal here and there just to get through this step or that, and it ends up making for a lumpy transaction. You’re not necessarily going to get the best advice and get the best way. Yes, you might save a little bit of fees here, but you sometimes lose on the other end. So much can go wrong, especially if a deal dies because of various problems that advisors could have helped with. I think it’s important—no matter who you use—to use your advisors, get that team going, and work with that team carefully.

[35:02] Dave Sheppard: Some of the best business owners we work with actually have been through a sale process or two before, because they actually understand what it takes to get through it and get through it successfully. They understand that there are times when you’re the seller that the buyer is going to tick you off. They’re just going to make you mad. If you let that get to you personally, into your emotional quotient on that, it could actually hurt your deal. You don’t want it to hurt your deal for your stakeholders. So let Sheppard take it on, or let Mike take it on, or Kevin.

[35:39] There are several times in every process—because no two are ever the same—but at some point in every single one of them, I’ll end up having a conversation with a buyer and say, “Hey, I know those PwC guys mean well, but frankly, they’re a couple years out of school because those are the ones they put on the audit teams. They’ve never run a business. You put them on a trail, and they think they’re hunting something, but they’re not really hunting anything. So what do you really need? Let’s cut the BS and let’s get to the heart of what you need so our seller can move forward and get you to that point—because we know nobody wants to misrepresent anything. We want to make sure there’s clarity. But we don’t want you, as buyer, to tick off that seller. Because you know what? When they’re ready to sell but they don’t need to sell, we don’t have to sell to you. So let’s work together here.”

[36:27] Mike Sibley: Great point.

[36:39] Hey, so Dave, we keep talking. We could talk all day on this. We’re kind of getting to the point where we’re going to wrap up here. But just final question: if there’s one piece of advice you could give to a manufacturing business thinking about the future of their company, what would it be? I know there’s a million things you could probably say here, and we could talk until tomorrow morning on it, but if you had to kind of just pick one thing, what would it be?

[36:58] Dave Sheppard: In terms of thinking about the intrinsic value or the future market value of the company—just the future market value—assuming that this person’s going to put their business on the market at some point?

[37:07] Mike Sibley: Yeah.

[37:10] Dave Sheppard: I think the best piece of advice, first of all, is feel good about what you’re doing, the business that you’re in. Because when you’re in business—and we’ve all been in business in a lot of different ways—it’s a lot of work. I don’t care which business you have. And if you’re in manufacturing, it’s even more work.

[37:27] With all respect to people in service—because we’re in service—and we do work 24/7 to help our clients, but manufacturing is tough. I mean, you get hit by these things that you didn’t expect. You get COVID, you get the supply chain things, you get the tariffs, you get the margin hits. All of a sudden, you think everything’s fine, and then all of a sudden your biggest customer is demanding a 25% cost reduction.

[37:52] So first of all, just get comfortable that you’re enjoying the business that you’re in. And if there are certain parts of the business that you don’t enjoy as much, get good people to manage those parts of the business for you so they can take away the not-so-fun part, and you can enjoy what you’re doing. Because business really is fun when you’re doing it the right way.

[38:12] As you’re building the team and building that intrinsic value, you actually can start to have more fun with your business. You can enjoy each day, each month, each year as you’re growing the company to the point that you are ready to sell—not that you have to sell, but that you’re ready to sell. I think that’d be my piece of advice.

[38:28] Mike Sibley: Great, great advice, Dave. Thank you so much for sharing your expertise and your time with us today. I’m sure our listeners will also appreciate it.

[38:38] For everybody listening and watching, we always appreciate your time. Hope you get value out of this. We enjoy covering this. But as always, if you have questions or things that we can do to help your business, please give us a call. Again, thank you for your time. Hope you guys have a great day.

[38:53] To learn more about James Moore and Company’s manufacturing services, go to jmco.com. And don’t forget to subscribe to our Moore on Manufacturing series to receive updates when new videos and podcasts are released. If you’d like to be a guest or if there’s a topic you’d like to see covered on a future episode, contact us on our website. You can also follow us on social media for more news as the landscape on manufacturing continues to evolve.

 

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