How does a confidential manufacturing sale actually run?
Step 1 — Intro call
Jason Taken takes a 20-minute confidential call. The useful facts are sub-sector, trailing earnings, real estate, top-customer share, certificates, union status, and whether the owner still quotes every job. Sellers and buyers use the same calendar. There is no form.
Step 2 — Recast and a broker opinion of value
Three years of financials and tax returns, YTD, and a first machine list. The recast produces SDE or adjusted EBITDA — not both pretending to be the same number. Valuation explains the size-band table. The opinion is a range and a buyer-set, not an appraisal.
If OLV of the iron is going to compete with earnings value, that conversation happens here, before a teaser promises a growth multiple.
Step 3 — Blind teaser and confidential marketing
The teaser describes a region, a process, a size band, and a certificate set. It does not name the street, the customer, or “the only shop in the county that does X.” Buyers who cannot sign an NDA and show a capital path do not get the CIM.
IBBA Market Pulse Q1 2026 found 83% of deals over $5 million drew three or more offers (Source: IBBA/M&A Source). That is the point of a process. It is not a promise that every file will.
Step 4 — NDA, staged data room, buyer competition
Order of release:
- Financials, recast, machine list, concentration without names
- Quality manuals, backlog aging, inventory classes
- Named customers, pricing, and contracts
- Plant visit
- Management / key-employee meeting
Why a specialist exists is mostly this step. A generalist who dumps the customer list into a shared folder in week two is not running a manufacturing process.
Step 5 — Letter of intent
A useful manufacturing LOI states enterprise value, cash vs. note vs. earn-out vs. rollover, working-capital peg definition, real-estate treatment, exclusivity period, and who pays for QoE and the M&E appraisal. Vague LOIs become exclusive periods that die in inventory.
SBA buyers must fit the $5 million 7(a) cap and SOP 50 10 8 injection rules (Source: SBA). If the structure only works by pretending a seller note is cash, the LOI is not lender-ready.
Step 6 — Diligence, QoE, and the plant visit
Diligence is not a scavenger hunt. It is confirmation of the recast, the certs, the liens, the environmental file, and the labor. ASTM E1527-21 Phase I belongs here when real estate or process history requires All Appropriate Inquiries (Source: ASTM / EPA AAI).
Quality of earnings is a third-party look at the add-backs. Treat it as a scheduled event on larger EBITDA files, not as an ambush.
Plant visits are scripted. Buyers do not wander. Photographing fixtures is a confidentiality failure. The physical inventory and the machine walk-down should match the CIM, or the price moves.
Step 7 — Purchase agreement and close
Asset vs. stock, assignment consents, employee offers, PTO treatment, non-competes, escrow, and the inventory true-up are counsel’s documents. The broker’s job is to keep the peg definition from being rewritten into a retailer template.
Working-capital true-up and the inventory count are where manufacturing deals finish. Unbilled WIP and job-cost inventory need a method stated in the agreement, not a handshake.
BizBuySell’s 2025 year-in-review put manufacturing at a 223-day median time to close — the slowest major sector in that dataset (Source: BizBuySell). Use it as a planning number. Do not use it as a commitment.
What buyers do in the same sequence
Buyers write a buybox, receive only NDA-gated files that fit, and do not ask for a tour to “get a feel” before they have read a tax return. Searchers and SBA buyers should arrive with a capital path. Strategics should arrive with a consent plan. Foreign buyers should arrive knowing CFIUS and ITAR clocks exist.
After close
Transition days are written, not implied. The owner trains the estimator. The buyer does not fire the programmer in week one to “save costs.” The first 90 days are an operating plan.
What the data room looks like when it is not theater
A manufacturing data room that works has named folders, not a 400-file dump. Financials and tax returns sit together. The machine list is a spreadsheet with serials, not a PDF brochure. Concentration is T12 and T36 with codes instead of names until the NDA layer allows names. Quality certificates include the last audit PDF. Environmental, if it exists, is the Phase I plus any open agency correspondence — not a verbal “we’re fine.”
Version control matters. A recast that changes twice a week without a log is how buyers lose trust. The broker’s job is to freeze a version, mark the next version, and explain the delta. That is also how QoE gets cheaper: the accountant is not reconstructing the story from email.
How buyer competition is actually run
Teasers go to a list that matches the size band: SBA operators for SDE files, searchers and sponsors for $1–3M EBITDA, add-on platforms and strategics when the certificates and earnings justify the outreach. Foreign names get a CFIUS/ITAR screen before they get a CIM.
Indications of interest are collected on a date, not dribbled. The LOI that wins is not always the highest headline. It is the one whose cash, note, peg, and financing path can close. A $1 million-higher strategic that needs a six-month antitrust or novation path may lose to a cleaner SBA structure. The seller should see that trade in writing.
Site visits happen for the short list, not for the curious. If twelve people have walked the floor, confidentiality is already broken.
Working-capital peg and inventory count, written as mechanics
The peg formula is agreed in the LOI and repeated in the purchase agreement: current assets in the definition minus current liabilities in the definition, using a trailing average, excluding cash, debt, and income taxes unless the parties say otherwise, with inventory at the lower of cost or a stated net-realizable rule after E&O. Manufacturing adds a WIP method. If the method is missing, the buyer will invent one during exclusivity.
The count is physical, usually the weekend before or the morning of close, with both sides or a third-party counter present. Variances above a band adjust cash. Variances that reveal systematic overstatement adjust more than cash — they reopen earnings.
Transition days and the first payroll
The agreement should state how many days the owner will be on site, whether that time is included in the price, and what “training” means: quoting, customer introductions, ERP, and the one fixture only the owner can set. Key-employee offers should be drafted before the announcement, not after a resignation. PTO treatment is a cash item. Non-competes are counsel’s paper; they still need to match the customer map.
What “qualified buyer” means in practice
Qualified is not “they asked.” For an SBA path it means a credit story, equity that fits SOP 50 10 8, and a plant they can operate. For a searcher it means search capital plus a board that will fund the close. For a PE add-on it means a platform that already exists and a QoE budget. For a strategic it means a consent plan. For a foreign buyer it means someone has already asked the CFIUS and ITAR question.
Unqualified buyers are how rumors start. They take the tour, they tell a programmer “we might buy this place,” and they disappear. The process exists to spend time on people who can finish.
How long to plan, without turning a median into a promise
BizBuySell’s 223-day manufacturing median in 2025 is a planning number for Main Street listings (Source: BizBuySell). Add time if you need a Phase I, a novation, a 504 on the building, or a QoE that has to rebuild job cost. Subtract time only if a priced buyer is already inside an NDA and the books are clean. Either way, the close date in an LOI is a target. The inventory count is a fact. Do not confuse them in the announcement to employees.
What sellers should gather before step 1
Three years of financials and tax returns, YTD versus prior, a machine list with serials, AR/AP aging, inventory by class, a nameless concentration schedule, backlog aged into firm versus forecast, quality certificates, and any environmental report that already exists. If those are not in a folder, the recast will be a reconstruction project. That is still doable. It is not a one-call valuation.
Buyers should gather a buybox, proof of funds or a lender conversation, and a list of what they will not do. Showing up with “manufacturing, anywhere, under $10 million” is how processes stall at step 3.
The sequence as a table, not a slogan
| Step | What leaves the building | What stays locked |
|---|---|---|
| Intro call | Sub-sector, size band, real-estate posture | Customer names |
| Recast | Tax returns, add-back binder | The shop rumor |
| Blind teaser | Process + region + size band | Address, crew, logos |
| NDA + CIM | Financials, machine list, nameless concentration | The customer appendix |
| Short-list visits | Scripted floor time | Random Tuesday walk-throughs |
| LOI → close | Peg method, count, consents | Public listing by default |
BizBuySell’s 2025 manufacturing median time to close was 223 days (Source: BizBuySell 2025 Year in Review). Use it as a planning number. Do not print it on an employee announcement as a promise. Files that need a Phase I, a novation, or a QoE that rebuilds job cost run longer. Files with a priced buyer already inside an NDA can run shorter. Either way, the inventory count is a fact and the LOI date is a target.
Sell and buy are the decision trees. This page is only the spine.
Educational information only. Not legal, tax, or environmental advice. No timeline or price is guaranteed. Contact Jason Taken to start at step 1.
Business broker licensing by state is the registration pile. This page is the sale sequence.
Where licensing sits next to this sequence
Business broker licensing by state is the registration pile. This page is the sale sequence: recast, blind teaser, NDA, staged CIM, scripted visit, LOI, count, close. Do not skip the sequence because a directory listed a phone. Do not skip the registration question because this site is nationwide.