MMT Chats: Acquisition Trends and Lessons for Mold Builders

For this MMT Chat I sit down with founder and M&A leader for Augmented Industry Services (AIS) to get the answers to these five questions:

1. How did AIS develop and why is different from other acquisition firms? (0:28)
2. Why is there so much M&A activity within moldmaking the past few years and what does it ultimately says about this niche within manufacturing? (9:41)
3. What has been the impact of COVID on all of this M&A activity? (12:42)
4. What advice do you have as to what a mold builder can do to prepare for a sale? (15:46)
5. With the goal being to grow the acquired shop including its people, what do you believe is the top priority of the new owners and the leadership of the acquired shop to make it all work? (20:46)

A few tidbits to whet your appetite:

• Investment capital continues to pour into private equity funds (because of their historical performance for their investors) and private equity has identified plastics - and moldmakers - as ways to get into healthcare, packaging and other growing end markets.
• Apart from attractive end markets, some investors believe moldmaking creates an attractive consolidation opportunity.
• By acquiring several moldmakers and creating scale, these combined companies can pursue larger moldmaking opportunities with large consumer goods companies who launch products in multiple countries around the world.
• Moldmakers, who predominantly service growing and recession-resistant end markets such as healthcare and packaging, will command a higher multiple than those who do not.
• If you can add automation to a CNC or EDM and save labor costs—fewer operators or less overtime—do it!
• When considering an equipment purchase, pay particular attention to the opportunity to reduce labor costs and improve productivity with higher-axis and higher-speed equipment.
• If you can grow beyond your budget, the extra work is more profitable than the work you've budgeted because the work you budgeted has already covered your fixed costs.
• To maximize the sale proceeds, reduce inventory and speed receivables collection in the 12-36 months before you sell-driving down your averages.
• Smaller mold builders often work on handshakes and purchase orders, but business practices must evolve as a shop approaches a sale.

Watch the full video chat above, and for more of our archived MMT Chat conversations, click here.

Stay informed and stay inspired.

For the full quick chat, watch above, and for more MMT Chats, click here.

This episode is brought to you by ISCAR with New Ideas for Machining Intelligently.