Michael Levison

Everyone’s talking about growth in manufacturing due to reshoring, automation and AI driven productivity. Almost no one’s talking about exit readiness in these companies. Yet the biggest wins in today’s M&A market aren’t going to the companies with the highest revenue — they’re going to the ones that are best prepared to sell. Here’s what I’m seeing across recent manufacturing deals 👇 1️⃣ The Real Drivers of a Premium Valuation The “average” manufacturing deal trades around 5–8x EBITDA, but the best-run companies are getting 8–10x — even higher.  What separates them? Five value drivers: ✅ Process efficiency: Buyers pay more for automation, data integration, and “lights-off” manufacturing that runs with minimal human labor.✅ Revenue quality: Multi-year supply contracts or recurring consumable sales reduce risk and boost value.✅ Customer resilience: If one customer accounts for 30% of revenue, your multiple drops fast. Diversify early.✅ Competitive moat: Patents, specialized processes, or proprietary know-how protect margins and attract strategic buyers.✅ Growth capacity: Buyers pay for what they can scale — underutilized capacity, new markets, or product extensions all count. Efficiency, predictability, and defensibility create valuation lift — not just revenue size. 2️⃣ The New Power Players: Private Equity Private equity firms have become the dominant buyers in manufacturing in recent years.  Most aren’t buying standalone “platform” companies — they’re adding “bolt-ons” to existing platforms.  They’re looking for businesses that fill a gap — new geography, new capability, or new customer base. If you’re a potential bolt-on, here’s how to stand out: ✅ Research which PE firms already own companies like yours.✅ Show how your business complements theirs — efficiency, relationships, or market access.✅ Be ready for deep due diligence. Organized financials, equipment logs, and customer data build trust.✅ Map out the next-stage growth story — not just what you’ve done, but what you enable. Private equity buyers pay for clarity and scalability. Make it easy for them to see both. 3️⃣ Supply Chain Risk Is Now a Valuation Lever Buyers used to skim over supply chain details.  Not anymore. After the last few years, they’re laser-focused on sourcing risk — especially overseas dependence or single-source suppliers. Here’s what strong sellers are doing: ✅ Building redundancy — at least two qualified suppliers per critical input.✅ Mapping their supply chain visually to show resilience.✅ Documenting long-term supplier relationships and performance metrics.✅ Creating continuity plans that address disruptions before they happen. You don’t have to be disruption-proof — but you do need to prove you can adapt fast. 🏁 Final Thought If you’re considering a sale in the next few years, the best time to prepare was yesterday.The second-best time is now. At VAP/Raincatcher, we help manufacturing owners identify the 3–5 changes that can most increase valuation within 12 months.

When buyers say a business “depends too much on the owner,” they aren’t questioning work ethic—they’re identifying risk, and risk erodes value. No matter how strong the numbers look, a company that can’t function smoothly without the owner at the center will struggle to attract serious buyers or command a premium price. Why Owner Dependency Kills Value In most purchase transactions, buyers primarily evaluate two things: profitability and transferability. Profitability tells them how much the business earns today. Transferability tells them whether those earnings will continue after the owner steps away. A company whose revenue, relationships, and decisions all flow through one individual has weak transferability. Buyers worry that when the owner exits, customers may leave, employees may lose direction, and the company’s rhythm may falter. That uncertainty usually translates to fewer bidders, longer negotiations, and lower valuations. We offer a free tool that we offer, called the Value Builder Score (VBS),  helps identify the most common value gaps we see in owner-led businesses. Owners who built their companies from the ground up often become the hub of every wheel—sales, pricing, operations, even HR. It’s understandable, but it’s not sustainable.  To get your company’s VBS, click here. The Financial and Deal Impact Dependency issues almost always surface during diligence. Sophisticated buyers notice immediately when the owner controls key accounts, personally closes deals, or signs every check. More often than not, this will result  in more contingencies, longer transition periods, and performance-based earnouts instead of clean cash closings.  Buyers know they’ll need to hire or develop new leadership, document systems, and invest time in stabilizing relationships—all costs that get factored into their offer. Reducing Owner Dependency 1. Document and DelegateStart by getting what’s in your head onto paper—or into systems. Document core processes: sales steps, client onboarding, service delivery, reporting. Then assign ownership. Empower trusted team members to make decisions, even small ones. The best test of independence is whether the business can run smoothly when you take a week off. 2. Build Structural IndependenceInstall systems that institutionalize best practices. CRMs, project management tools, good training and consistent reporting all help ensure visibility without micromanagement. Formalize roles, create standard operating procedures, and build a cadence of team accountability meetings. The goal is not to make yourself unnecessary overnight, but to make yourself optional in day-to-day execution. 3. Transfer Relationship OwnershipBuyers pay premiums for businesses with diversified customer and supplier relationships. Begin transitioning key accounts to other leaders. Introduce senior staff to your most important clients and vendors. Build team-based relationships so loyalty transfers to the company, not just the founder. 4. Strengthen the Second Layer of LeadershipThe presence of a capable management team reassures buyers that the business has continuity. Invest in developing mid-level managers who can think strategically and execute operationally. Even small companies can benefit from a “shadow leadership” approach, where rising team members participate in higher-level discussions and decision-making. Reducing owner dependency doesn’t just make your business more sellable—it makes it stronger today. When processes, relationships, and decisions are distributed, performance improves, stress declines, and enterprise value grows. The first step is understanding where you stand take the Value Builder Score Survey.  The resulting report provides a clear, data-backed assessment of your company’s dependency risks and practical steps to increase transferable value as well as providing insights into how your business compares to other similar companies. Schedule a confidential consultation to see how your business scores—and what you can do now to build a company that runs without you.

I’ve seen more than one deal nearly fall apart when the buyer’s SBA lender started asking tough questions late in the process. Sellers who thought they were weeks away from closing suddenly faced landlord disputes, paperwork delays, or rigid SBA rules they’d never heard of. If you’re selling your business, understanding how SBA financing works can save you from those surprises. Before you decide whether to accept an offer from an SBA-financed buyer, it’s important to understand both the upside and the potential pitfalls. Advantages of Selling to an SBA-Financed Buyer A Larger Pool of Buyers Many individuals and first-time entrepreneurs rely on SBA loans because they don’t have the personal capital or institutional backing to pay cash. Accepting SBA-financed buyers increases the pool of potential acquirers, which can mean stronger demand for your business. More Cash at Closing Unlike pure seller financing arrangements, SBA loans allow you to receive most — if not all — of the purchase price in cash at closing. This reduces your exposure to collection risk and accelerates your payday. Government-Backed Stability Because the loan is partially guaranteed by the SBA, lenders are more comfortable extending credit. This backing gives buyers confidence and can lead to more secure closings compared to deals with weaker financing sources. Motivated Buyers The SBA loan process is not for the faint of heart. Buyers who commit to it are often highly motivated and willing to endure the paperwork, personal guarantees, and waiting periods. That motivation can translate into a serious, qualified buyer for your business. Disadvantages of Selling to an SBA-Financed Buyer Longer Timelines and Deal Risk SBA loans involve multiple layers of approval — bank underwriting, SBA guidelines, and often third-party reviews. This can add weeks or months to the process. Deals sometimes collapse late in diligence if the loan is denied, leaving the seller with wasted time and no closing. Heavy Documentation Burden Lenders will scrutinize financial statements, tax returns, contracts, and other records in extreme detail. If your books are disorganized or incomplete, expect delays. For sellers, this means you must be prepared to deliver lender-ready documentation upfront. Lease Subordination Requirement SBA lenders often require landlords to sign a lease subordination agreement, acknowledging the lender’s lien has priority over the lease. Many landlords — especially those with their own mortgage lenders — resist this. If not addressed early, it can kill a deal. Lease Term Modification In addition to requiring subordination, SBA lenders often insist that the lease on your facility be extended to match the full term of the loan — sometimes 10 years or more. This can be a major stumbling block if your landlord is unwilling to commit to such a long extension, or if you as the seller know the business won’t need that location long-term. Negotiating this requirement early is critical, as it has derailed many otherwise solid deals. Seller Note Subordination If a portion of the deal includes seller financing, the SBA requires that note to be subordinate to the bank’s loan.  Certain types of Seller notes prohibit principal or interest payments until after the loan is paid off.  This limits deal flexibility and can affect the seller’s ability to negotiate favorable repayment terms. Limits on Seller Transition Under SBA rules, the seller cannot remain as an employee of the business for more than 12 months post-sale. This restriction makes longer transition periods — sometimes essential in owner-dependent businesses — impossible under SBA financing. 100% Sale Requirement SBA financing generally requires a complete change of ownership. Sellers cannot retain equity in the company as part of a phased buyout or minority rollover. If your exit strategy involves retaining a stake or transitioning out gradually, SBA financing will not allow it. How Sellers Can Improve Their Odds of a Successful SBA Deal Prepare Clean Financials Ensure your tax returns, P&Ls, and balance sheets are consistent and accurate. Work with your CPA or advisor to resolve discrepancies before going to market. Address Lease Issues Early Talk with your landlord well before a deal is underway. If they’re unwilling to sign a subordination agreement, you’ll want to know that before wasting time with an SBA buyer. Standardize Key Contracts SBA lenders review customer, vendor, and franchise agreements closely. If your contracts are inconsistent, expired, or informal (“handshake deals”), that can spook a lender. Before you sell, update and standardize critical contracts so they’re lender-ready. Clean Up Compliance & Licensing The SBA requires proof that the business is operating legally and with all required licenses. Even small gaps — an expired occupational license, outdated insurance certificate, or missing environmental permit — can delay approval. Doing a compliance checkup in advance avoids last-minute surprises. Organize Corporate Records Buyers and lenders both need to see clear ownership documentation, meeting minutes (if applicable), and evidence that the company is in good standing. Having your corporate books tidy helps the lender move faster and signals professionalism. SBA financing is a double-edged sword for sellers. On the one hand, it brings more buyers to the table and increases the likelihood of receiving cash at closing. On the other, it introduces longer timelines, stricter requirements, and rigid rules that limit flexibility in how a deal is structured. If you’re considering selling your business, don’t dismiss SBA-financed buyers — but go in with your eyes open. Preparation, clean records, and experienced guidance can turn SBA financing from a roadblock into a reliable path to closing. For more insight into the steps you should be taking now to help ensure a successful exit down the road, feel free to schedule a brief call with me using this link: https://calendly.com/mikelevison

When it comes time to sell your business, one of the most important decisions you’ll face is how the deal is structured and one of the most important issues are the impact to your net proceeds between a stock sale and an asset sale.  At first glance, this might feel like legal or accounting jargon, but the choice can have a huge impact. Understanding the differences will help you enter negotiations prepared and avoid surprises down the road. What’s the Difference? In plain terms, the difference comes down to what the buyer is actually purchasing: Think of it like this: Pros and Cons for Sellers Here’s a quick comparison of how the two approaches typically play out from a seller’s perspective: Factor Asset Sale Stock Sale Liabilities Seller often retains liabilities unless specifically assumed by buyer. Buyer takes over all liabilities of the business. Taxes Portions of the sale may be taxed as ordinary income (e.g., depreciation recapture), which can increase tax burden. Generally taxed at long-term capital gains rates, often more favorable. Simplicity Requires re-titling of assets, assigning contracts, and transferring licenses. Cleaner and often simpler; ownership transfers in one step. Buyer Appeal Buyers prefer asset sales (clean slate, can pick and choose what to take). Less attractive to buyers; they assume risks and liabilities. Seller’s Net Proceeds Often lower due to tax treatment. Usually higher after taxes. Tax Implications at a Glance For most business owners, the tax consequences are the biggest difference between an asset sale and a stock sale. You don’t need to be a tax expert to understand this issue can significantly change what ends up in your pocket after the sale. A Simple Example Assume you sell your business for $5 million. Big difference!! Why Buyers Prefer Asset Deals If stock sales are usually better for sellers, why do so many deals end up as asset sales? The short answer: buyers have the upper hand in preferences and here is why: Key Takeaways Every business is different. Factors like your corporate structure (C-Corp vs. S-Corp vs. LLC), your industry, and the specific buyer’s goals all play into the final outcome. If you’re considering selling, let’s talk about whether an asset sale or stock sale makes the most sense for your situation. Contact us today to schedule a confidential discussion.