The industrial distribution market is a highly fragmented one, with a large number of small firms. Many of these are independent, family-run businesses, which often have a degree of specialism that perfectly positions them to work with specialist local companies.
However, in Europe – a region where scale matters – these smaller businesses often face challenges in servicing the increasing demands of larger manufacturing businesses and competing with the service offerings of the far larger competition. Selling to a larger group can help overcome these challenges.
Here, Kamil Szczudlik, Head of M&A at Rubix focuses on five critical questions companies should reflect on before looking to sell their business.
When strong businesses consider a sale they will always have a choice. Often, these local, family-owned businesses have proud histories and very loyal customers and suppliers, placing them in an advantageous position as the sellers. In making a purchase, the upside for Rubix is clear but it’s a big decision and a pivotal moment for any business owner, their families and the legacy they will leave behind. So which issues should business owners pay attention to before completing a business transaction?
Does it make sense?
For Rubix, it’s likely to be about expanding the footprint, extending technical expertise, adding service capability, or some combination of those factors. For any business considering a sale, the benefits will include a significantly expanded product and service offer as well as vastly extended customer reach.
The sale will make sense if what the buyer has to offer helps drive business objectives for expansion and scale. If the buyer has the facilities or potential to grow and align while maintaining the existing business values, it is a good indicator that you have made the right choice on who to sell to.
Is it culturally compatible?
Customer satisfaction is a foundation for strong businesses to succeed. Customer loyalty and business growth begin with highly engaged colleagues. These are key values that Rubix shares and encourages. During an acquisition, communication, collaboration and transparency with our new colleagues are essential – both to ensure a smooth transition and on an ongoing basis.
Ensuring that the business has good values and holds them to a high standard is a good indicator of how compatible the company is. If the company has values set in place but its actions stray away from its values, then this is something to take into consideration.
On the other hand, if the company hires staff that align with the company’s beliefs and ensure that the values are taken into account when taking on new staff and making decisions, this is a good sign of cultural compatibility.
Will the legacy be respected?
This is particularly important for businesses bearing the family name. As the seller you will want to join with a business that has a proven track record of preserving heritage and values. Rubix adopts a gradual approach to branding integration that consistently honours the legacy. Ongoing involvement from existing management teams is crucial for ensuring a successful transition, even if it’s only for a limited period.
Having a thorough understanding of the company to which you are selling your business is a strong indicator of how your legacy will be respected. Taking the time to get to know the individuals leading the business and ensuring they appreciate its history is essential.
Building a brand name and building loyalty can take years, making it vital to promote core values when selling a business.
Will my teams be supported?
Any business owner will want to be clear on how the transition will be managed and satisfied that any future owner communicates effectively with you and your staff. They should also ensure commitments are in place to support ongoing training, development and career progression. The knowledge and expertise of our people set us apart from the competition, so we understand that quality performance starts with highly skilled, well-trained and motivated colleagues.
By taking a look at the buyer’s existing businesses, their experience of acquiring similar companies, how they are already supporting their teams and how they treat their staff, you gain a clearer understanding of whether your own business will be placed in good hands.
A buyer with a proven track record of successful acquisitions will be better equipped to manage change sensitively and welcome new colleagues into the group. At Rubix, having acquired more than 70 businesses, we like to think this experience enables us to provide continuity, reassurance and long-term commitments for employees, supported by ongoing development opportunities and additional benefits to help teams feel secure and valued throughout the transition.
Is the value fair?
The valuation reflects a business’s track record, current strength, future potential and business-specific characteristics. Ultimately, a transaction can only take place if the terms are mutually agreeable. Rubix looks to ensure that such a position is reached early in the process, relying on open discussions with business owners. Business owners should ensure they have well-documented information, as this facilitates discussions and the execution of an acquisition process.
Fair valuation is important for both businesses involved in the process.
Acquisition support
As the largest supplier of industrial MRO products and services in Europe, Rubix has grown significantly since it was created in 2018. Having developed a catalogue of successful acquisitions helping to secure its market share of c.4% (significant in the fragmented landscape), Rubix’s experience in handling the purchase of independent businesses is both clear and valuable. Rubix’s approach to acquisitions provides smaller independent businesses with access to scale.
Rubix supports its clients in a wide range of sectors including manufacturing, automotive, food and beverage, pharmaceuticals and energy.
We are always open to starting a discussion with a business owner, whether at an early or later stage of reflection. Business owners can contact confidentially our dedicated acquisitions team via www.rubix.com/acquisition-strategy.
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