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Improvement Opportunities In Manufacturing Targets

October 26, 2021

While none of these should preclude an acquisition, we’ve come to witness several variables that suggest that an acquired company may need extra help.  These include:

  • Are the finance employees familiar with using your preferred (or an analogous) ERP system, or will they be learning to use a sophisticated system anew?
  • Will the target be required to adopt new revenue recognition standards post-acquisition (the best example being the migration to percentage-of-completion accounting from recognizing revenue at shipment)?
  • Do they update their cost standards (and their “shop” or “machine” rates) annually?
  • Are they able to (and do they) pass through price increases as raw material costs increase, or will doing so be a shock to their customers?
  • Can they or do they reprice existing work if volumes fall below quoted volumes, or will doing so be a shock to their customers?
  • Do they operate to a manufacturing plan – in other words, do their customers provide lead times with the factory being scheduled weeks in advance – or do they take orders and fit jobs in as machines become available?
  • Do they impose minimum job sizes and are those job sizes consistent with driving manufacturing efficiencies?
  • Do they have a spares (spare parts) management program with recurring replenishment, or are spare parts acquired ad hoc as machines go down?
  • How old is their machine/press fleet and is it relatively homogenous in selected brands or do they have machines from multiple manufacturers?
  • Are their production lines and quality processes largely automated, or do they rely on manual labor and inspection?

These are but a handful of examples – all of which tie directly to financial performance – that we’re happy to assist with as you underwrite your manufacturing platform.