Fast Growth Created Production Constraints

The Situation

The owner of a contract manufacturing metal fabrication company experienced significant growth with some of his large customers. While the backlog was increasing; delivery dates were being extended, and he had a difficult time recruiting skilled employees at any price. The operating demands required new investment in equipment and additional production space. The company’s largest customer was growing and required a vendor with the capability to support their production needs.

Our client needed a quick solution, or he was in danger of losing his most significant customer.

The owner wanted to explore the possibility of buying a competitor with updated equipment, existing skilled labor, and a building with additional capacity. In other words, a contract metal fabrication company that had an underperforming asset that could handle the overflow of work from his customers. The idea was that it was faster, cheaper, less risky, easily bankable, and his customer would gain more confidence to meet delivery schedules.

The Process

Next Point met with the owner to help develop a detailed specification for the successful acquisition target. The ideal target would be within a 40-mile radius of the company so that the owner could manage both locations. Other priorities included a matching company culture, updated equipment, and a well-trained labor force. We utilized our proprietary metal manufacturing database and narrowed the acquisition candidates based on their size, location, and service offering.

Next, we targeted high-potential candidates and contacted the owner’s directly to ask if they would consider a sale and to evaluate them for a strategic fit with our client’s company. We encouraged interested sellers to set up meetings with our client to gauge compatibility and to help both parties to determine their level of interest in moving forward.

Our client evaluated a number of opportunities and selected the most attractive option that could move forward and close quickly.

The Turning Point

Next Point worked with our client to craft a letter of intent that provided an initial offer and deal structure to entice the seller while remaining within their anticipated structure. Once the letter of intent was accepted, Next assisted our client’s CPA in the due diligence process and their attorney in negotiating a contract for the proposed purchase, through to the definitive agreement.

The acquisition has been successful, and our client was able to keep their top customer and is now ready to quote on parts they would not otherwise have had the opportunity to quote.

Services Performed

  • Acquisition Services
Acquisition Services - Next Point LLC