There's a right way and a wrong way to buy and sell a company

CHICAGO — Both Terry Minnick and Andrew Munson make a living by putting together buyers and sellers of plastics businesses.

They've seen what works, and what doesn't, over their years of experience at Molding Business Services of Florence, Mass.

And while there are plenty of business consultants out there who will tell you what do to make a deal work, Minnick and Munson says are some definite things to avoid to successfully sell a plastics molding company.

MBS has been around since 1998, when Minnick started the firm.

 “I was hoping there had to be an easier way to make a living than owning a custom injection molding company. I tell people I lost most of my money and all of my hair in the plastics business, which is probably true,” he said during a humor-filled presentation at the recent Plastics Financial Summit in Chicago.

“I was right, by the way, being a consultant is much easier than owning a custom injection molding business,” the MBS president said.

And here's a key detail Minnick has learned over his nearly 20 years at MBS: don't try to time the market.

“Every processor that owns a business would like to sell his business at exactly the high point of the market so you can get just the most you can possibly can,” Minnick said. “I buy stocks that go down, they don't go up. It's hard to time the market unless you have a crystal ball.”

He recalled one deal during the Great Recession involving a custom injection molding company owner who had to sell quickly due to health reasons.

“Yeah, I said 2009. You couldn't sell $100 in cash for $85 dollars back then. It was really, really tough to sell a molding business,” he said. “We had no choice. We couldn't wait. We got lucky. We did find a very good buyer,” he recalled.

“We got the deal done. But we got about half of what we would have gotten a few years before that or half of what we would have gotten two years later. It was a very, very tough situation.”

Another particularly tricky area can involve dealing with family businesses with owners who have divergent interests, Minnick said.

He remembered one potential deal that a company president negotiated to purchase an injection molding firm in Mexico.

“Suddenly, they walked away,” Minnick remembers.

The problem was that the president was only a one-third owner in the firm, and could not convince his two other relatives and owners to make the deal.

“The take away here is that when you are dealing with a family-owned business, whether it's buying or selling, it can be tricky,” he said. “You better make sure that if it's a family-owned business, all of the family is in agreement. Just one of three is not enough,” he said.

“I can tell you from experience.”

Munson, a partner in the firm, remembered a couple of deals involving companies that put themselves up for sale, received nice offers, but then held out for more before seeing the deals collapse.

“We've all heard the same thing, pigs get fed and hogs get slaughtered. Well, it's true in the M&A business,” he said.

“Don't be too greedy or too picky,” Munson said. “My grandfather used to say, everybody has a purpose in life, even if that purpose is to serve as a bad example.”

Another important aspect of selling a business involves a little common sense: clean up a little before guests arrive.

“Don't take your company to market without staging it first. You talk about staging residential property, you move the couches around,” Munson said. “You make it more appealing to potential buyers.”

Same is true for a plastics company.

“Sweep up resin pellets. You move the hydraulic fluid into the back room,” he said.

Companies also should make sure they hire competent professional service providers, and not just their friends, to help them through the sales process, Munson said.

He remembered one company owner who hired a friend, who was a divorce lawyer, to help out with the legalities of a deal.

“Don't skimp on professional services. Hire a good accountant. Hire a good attorney. Hire a good third-party due diligence provider. They are worth their weight in gold. For the accountants and attorneys out there, that's a free plug. You are welcome,” Munson said.

Despite the hurdles that plastics company sellers, or buyers, might face, Munson still held out hope for those challenging cases.

“For every short, fat, bald, stumpy guy at the bar with Coke bottle glasses and bad breath that's looking for a date, there's girl out there for him. You just need to find her,” he said.