Estimated reading time: 4 minutes

Punching Out: Preparing Your PCB/EMS Business for Sale

The summer is almost over, and owners’ thoughts turn from inner tubing to selling their company. These things rarely happen overnight, so you must prepare as much as possible. If you are reading this article and you own a business, that is a good start. Here are some tips for selling a business in the PCB/EMS sector.

We are often asked, “So, when is the best time to start to prepare for a sale?” It seems like the current generation buys companies with the exit already in mind, so the quick answer is either “when you buy the company” or “as early as possible.” The baby boomer generation is different; they plan to hand down their companies to their kids and then to their grandkids.

Truthfully, most owners do almost nothing to prepare their company for sale and are then surprised when the sale process does not go smoothly. Unfortunately, many owners then get educated by the School of Busted Deals. However, with some preparation and education, you can help increase your valuation, secure better terms, and make the deal smoother.

The Deal Team
The key members of the deal team are an M&A attorney, a CPA/tax advisor, a wealth manager, and an investment banker/business broker. Make sure that each member of the team has experience working with companies of a similar size to your business. Your long-term corporate attorney may be a great business advisor; however, their firm must be able to handle an M&A deal of your size. Each advisor can help you in different ways to get the company prepared for a sale. You may also need help from various consultants, such as environmental and real estate consultants, especially if you own the building.

Financials
Although it is not entirely about the numbers, it is mostly about the numbers. One of the key things that we see owners fail to prepare for is the financials. You must have a good understanding of the company’s financial standing and how the company makes money, then be able to present that in a coherent, timely, and consistent manner. Having a good handle on inventory is especially important for EMS companies.

Documents
Most owners bust a kidney when they see the first due diligence request list, whether it be five, 10, or 20 pages long—and that’s just the beginning. Next are all the questions about the documents. The more that a company prepares in advance, the smoother the due diligence will be. Your attorney, CPA, or investment banker can give you some sample lists, or you can check AI. But be sure to sit down first because it’s a lot. Just note that many of those questions can be answered “N/A” or “None” but not “No Way.”

Customers/Sales
The company may have great customers, but if the top customer accounts for 75% of sales or the top two together account for over 50%, that will be an issue for buyers. Customer concentration is one of the main reasons why companies fall apart. There are many ways to deal with concentration, none of which are easy or quick. So, understand the issue and do as much as possible to make buyers comfortable (they like “sticky” customers).

Operations/KPIs
The most important thing about KPIs is to know that they stand for “key performance indicators.” That way, when the 23-year-old analyst asks you about your KPIs, you know what the heck they are talking about. Each business has at least five to 10 KPIs that it tracks regularly. Be sure to document the main KPIs, such as on-time delivery and yield, and be ready to discuss how the company is working to improve these indicators.

Culture
What makes your company different? General statements such as “We are a family business” and “We treat our customers like kings” do not really describe the culture. Do a customer and employee survey to find out what makes the company special. It will be important to be able to state specific examples with buyers.

Real Estate/Facility
Whether you are selling the building or not, hire an inspector ahead of time and fix whatever issues come up. For PCB shops, consider getting at least a Phase 1 if not a Phase 2 study done as well. Clean up your interior and exterior, cut the grass, replace missing ceiling tiles, and throw away that rusty pile of old equipment in the back of the parking lot.

Self-preparation
This is the most important consideration. You must be completely sure you are ready to sell. The process is typically long, difficult, and expensive. It is worth it if you’re ready, but pulling out at the last moment is a costly decision. Having post-closing plans and a couple of good hobbies is important. Many owners see a benefit from having a business coach and/or joining a peer group like Vistage. Key-person risk is a major buyer concern, so be sure to develop a team around you that can handle the business while you go on a four-week golfing and culinary tour of Madagascar.

All deals are unique, but they share many similarities. Pick a group of experienced advisors who will help guide you through the process. Remember the 5 P’s: prepare, prepare, prepare, prepare, and pay yourself at closing!

Tom Kastner is the president of GP Ventures, an investment banking firm focused on sell-side and buy-side transactions in the tech and electronics industries. GP Ventures has offices in Chicago and Tokyo, with five people in total. Tom Kastner is a registered representative of, and securities transactions are conducted through, StillPoint Capital, LLC—a Tampa, Florida, member of FINRA and SIPC. StillPoint Capital is not affiliated with GP Ventures.