Why Intermediaries are Key to Successful Machining and Fabrication Acquisitions

September 13, 2023
intermediaries machining fabrication acquisitions

Machining and fabrication are where precision and innovation converge. 

Two businesses, each a leader in its own right, can forge a combined entity that reshapes the entire sector. 

The appeal of M&As in this industry isn’t just growth-driven. It offers avenues to venture into new territories, diversify offerings and bolster the supply chain. 

For owner-operators, it also paves the way for a dignified exit that ensures their legacy remains intact. 

Yet, the journey to a successful machining and fabrication acquisition or merger isn’t always straightforward. Many owner-operators are skeptical about involving intermediaries, thinking, “This is my business; why bring in a third party?” 

We’ve sat at both sides of this table. The value that intermediaries, particularly business brokers and M&A advisors, add is undeniable. They don’t just mediate and help in preparing a business for sale; they ensure smooth transitions. 

Their inclusion isn’t a cost—it’s a strategic move.

 

Navigating the Machining and Fabrication Acquisition Landscape

Machining and fabrication industries thrive on precision, complexity, and the relentless pursuit of innovation. 

But beneath the immediate flurry of machinery and production is a business landscape in flux. M&As are more than mere growth strategies; they are lifelines, especially for smaller firms:

  • Economies of Scale: Bigger operations can produce more, using fewer resources. 
  • Operational Savings: Consolidating resources can drastically reduce overhead costs. 
  • Diverse Client Offerings: Larger conglomerates can address a broader spectrum of client needs.


At the same time, preparing a company for acquisition in the machining and fabrication space comes with its own set of unique challenges, including:

  • Machine Dynamics: Every piece of machinery, from lathes to CNC machines, is a potential asset or liability. Understanding and accounting for their life cycles, upkeep requirements, and potential upgrade costs is essential for a successful acquisition. 
  • Regulatory Landscape: This industry services sectors like aerospace, automotive, and medical devices, which often mean navigating stringent regulations. We found this during our acquisition of VeriForm Inc.
  • The Human Element: At its heart, this industry relies on skilled artisans whose expertise is irreplaceable. Post-acquisition, keeping this talent on board is absolutely crucial to the business’s success. Preparing a company for acquisition is about people management as much as anything else.

M&As in machining and fabrication demand a comprehensive view that looks beyond the immediate transaction. Every aspect, from machinery and regulations to invaluable human talent, is on the table. 

The role of intermediaries in navigating this complex environment is invaluable.

 

Why Intermediaries Are Unsung Heroes of Machining and Fabrication M&As

In a field as detail-oriented as metalworking, M&As have become significant landmarks. 

However, the success of machining and fabrication acquisitions often relies heavily on the unseen heroes: the intermediaries. 

  • Business Brokers: These professionals operate primarily in the sub-$1M market, specializing in connecting sellers and buyers of smaller businesses. 
  • M&A Advisors: These are the heavy-hitters, handling transactions in the million to billion-dollar range. Their expertise lies in navigating the intricate aspects of larger M&As, ensuring both parties achieve their goals while meeting legal and regulatory standards.

Having been deeply involved in the acquisition process, we can vouch for the intermediaries’ pivotal role. Their expertise transcends facilitating transactions and preparing a business for sale—they help craft M&A stories that meet the needs of all parties. Their input has been especially valuable when it comes to: 

  • Mastery Over Documentation: Just as every component in metalworking has to be perfect, so does every piece of paperwork in M&As. And believe me, there is a lot of it. Even someone accustomed to dealing with mountains of red tape would find it hard to keep up. 
  • Clear Communication Channels: While direct owner-to-owner communication is important, having intermediaries in the mix guarantees that communication remains clear. Involving a level-headed third party heads off potential misunderstandings. 
  • Timely Transactions: Timelines are essential in M&As. Keeping things moving on the acquisition side can be challenging when you’re an owner-operator deeply involved in the day-to-day operations. Intermediaries ensure that every phase of the transaction progresses as planned.

But acknowledging the vital role of intermediaries is just step one. The next big challenge? Picking the right one for the job. 

Think of it like choosing the best tooling for the job. The right go-between can turn a complicated M&A process into a smooth ride. The wrong tooling can be a problem.

 

Choosing an Intermediary 

M&As in machining and fabrication can be likened to a championship sports game. Every play, strategy, and decision has to be on point to clinch the win. 

Intermediaries? They’re like the seasoned coaches, making sure every move is calculated and precise. 

But just as different sports need different coaching strategies, each machining and fabrication acquisition needs its own game plan and the right intermediary to execute it. 

Your company’s legacy and future ride on the outcome of M&A discussions, from preparing the business for sale all the way to closing the deal. So, choosing the right intermediary is not a decision to take lightly. 

The following steps can guide this critical choice: 

  • Real Credentials: It’s essential to ascertain the legitimacy of an intermediary’s qualifications and any licensing they hold. Engaging with recognized professionals is a cornerstone of trust. 
  • Past Track Record: An intermediary’s history speaks volumes. Delving into their previous engagements, outcomes, and client testimonials offers a reliable benchmark for their expertise.
  • Industry Experience: An intermediary with experience in machining and fabrication transactions possesses an invaluable edge. Their nuanced understanding of the sector often translates into smoother processes and more favorable outcomes.

In our own M&A endeavors, we’ve reaped substantial benefits from forging relationships rooted in mutual trust and respect with our intermediaries. 

This bond goes beyond transactional. It’s a symbiotic partnership where both parties invest, grow, and thrive.

 

The Collaborative Future of Machining & Fabrication 

In an industry ripe for evolution, the role of intermediaries is unquestionably pivotal. But beyond just transactional engagements, we at Arrow Machine and Fabrication Group are seeking transformative partnerships. 

To the business owners in this domain, understand that Arrow offers more than just a business opportunity. We envision a combined future wherein growth is mutual, collaborative, and focused not just on figures but also on shared values and innovation. 

For the dedicated intermediaries, we recognize your tireless efforts that often remain behind the scenes. Should our visions align, know that we stand ready to join forces to redefine the boundaries of our industry. 

As we chart the course for the future of machining and fabrication, it’s clear that this journey is a collective endeavor. No challenge is too great or horizon too distant when we work together.

 

Partnering with Arrow to Take Your Business to New Heights 

When we speak of mergers and acquisitions, it’s not just about numbers or contracts for us at Arrow. It’s about a partnership steeped in mutual respect, shared aspirations, and a commitment to excellence. 

Arrow is not just an umbrella of metalworking companies. It’s a community. We take pride in being a tight-knit family of skilled owner-operators with hands-on experience that has been honed over decades. 

This isn’t about detached leadership. Our leaders are individuals whose boots have walked the shop floors, whose hands have crafted projects, and whose hearts are deeply invested in the art and business of metalworking. 

Our acquisition approach is straightforward: we actively seek partnerships with growing, mid-sized metalworking companies that bring complementary capabilities or clientele to the table. 

We’re particularly interested in teams led by owner-operators who’ve cultivated their businesses with dedication but feel restricted by their current resources or team capacity. 

Quite often, we find that after a merger, owner-operators express the desire to continue being a part of the journey. This sentiment isn’t lost on us. 

We understand the invaluable assets they bring—the established customer relationships, the in-depth market understanding, and the rich technical knowledge. 

Our approach is tailored to accommodate the unique needs of each seller, including crafting deal structures that not only ensure continuity but also provide avenues for these operators to benefit from the ensuing growth. 

To the intermediaries reading this: your role is pivotal in bridging these partnerships. We value your contribution and see you as an integral part of this transformative journey. 

Well-executed M&As are never solo achievements. They were a culmination of shared efforts, expertise, and, most crucially, trust. As we move forward, we hope we continue fostering these connections, elevating our industry to new heights.

For more information

contact

Mike Ritchie

President and CEO

Arrow Machine and Fabrication Group

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