The Situation

Our client is a milling operation primarily servicing OEM manufacturers with precision parts. The company invested in automated equipment over the last 5 years. It purchased a turning center capable of single-setup production. Automated systems require a skilled person to perform the setup. The Company’s mix of work ruled out any machine running all the way through an unattended shift.

The primary restraint for growth for our client was hiring skilled labor. This was the main obstacle that impeded the Company’s ability to meet its customers’ delivery demands and to maximize its capital equipment investment.

Our client was having trouble hiring skilled labor locally because of competition with public companies that offer a more competitive labor rate and benefits. The company work with local technical school graduate but found that it still took considerable training, and the training time is an opportunity cost.

After reviewing their options to meet their customers’ demands, their calculation for additional business with the acquisition with a labor force could hit the ground running now instead of organically hiring and training a skilled labor force.

The Process

The acquisition project began with developing an acquisition profile to describe the ideal target acquisition. Next Point worked with our client to help identify the characteristics of “value drivers” of a target acquisition that could most directly impact the businesses. The result was an “acquisition specification sheet” that established an investment model with risk, effort, and reward assumptions.

Next, we focused on developing a list of target candidates that fit the acquisition profile. We built the initial list based on capabilities, size, and geography. Then our client reviewed the websites and narrowed the list into the “A” list and “B” list totaling 80 candidates. Our M&A team has extensive experience researching and then contacting acquisition targets to bring them to the table to initiate a dialogue.

We introduced our client to companies that were not actively for sale but whose owners were interested in selling. Once a shortlist of twelve targets was identified, we arranged for our client to meet with eight different business owners and take tours of their facilities.

The Turning Point

Our client eliminated eight companies based on the meetings and targeted their efforts on the four companies that closely matched their strategic acquisition requirements. We proceeded to help our client to evaluate each targets’ financial, organizational, and operational synergies. Our client ultimately selected a company with an owner interested in staying on and running the business. This was attractive to our clients because they would not need to replace key management, and they could realize the cash returns immediately at closing.

Services Performed

Milling - Next Point LLC