A buyer who acquires manufacturing companies for a living tells owners what he is really assessing: the one question that exposes founder dependency, and why the buyer most likely to clear out your team isn’t the one owners fear.
Most owners picture the same scene when they hear private equity: the management team gets cleared out and the business gets stripped for parts. Eric Wiklendt has spent his career on that side of the table. He is a Managing Director at Speyside Equity, which buys lower middle-market manufacturing companies, and in this episode he tells Doug Foley why that fear is usually aimed at the wrong buyer.
They get specific. Eric has done corporate M&A as well as private equity, and he explains why the strategic buyer in your own industry is the one with a structural reason to cut. It inherits two CFOs and two finance departments, and eliminating that duplication is often the entire reason the deal got modeled. A financial buyer has no such overlap, which leaves the team it just bought as the only group that knows how the business runs.
He breaks down the test he applies to founder dependency in about ten seconds: could the owner disappear for three weeks and lose their phone, and would quotes still go out and product still ship? He explains the phrase that names his whole approach, that close is commencement rather than completion, because nobody gets paid for buying a business. They get paid for what it’s worth three to seven years later. And he walks through the two or three pages of a hundred-page CIM that cover the management team, because human capital is what separates the top of an industry from the bottom.
If you own a manufacturing or industrial business you expect to sell one day, this is the buyer’s half of the conversation, from someone who does the buying.
In this episode: why the restructuring fear is aimed at the wrong buyer, synergies and the two-CFO problem inside a strategic acquisition, why a good financial buyer wants the business to stay boring, predictable cash flow as the product and volatility as the thing that gets discounted, close as commencement rather than completion, human capital assessed from the teaser onward and the two or three pages of a hundred-page CIM that carry it, Speyside’s human capital assessment framework, the three-week test for founder dependency, hub-and-spoke businesses and buying a calendar instead of a company, what makes a management team investable from the bottom up and the top down, the bimodal private equity industry at under a billion and over ten, two and twenty and why fee economics change how a firm behaves, and the 18 to 24 month runway to a close.
Disclaimer: All expressions of opinion in this podcast are subject to change without notice and are not intended to be a forecast of future events or results. There is no assurance that any trends discussed will continue or that any projections will be met.