Why reinvest in new equipment if I am going to sell in the near future?
Recently, I have seen several companies wanting to sell who have not invested in any new equipment for several years. Most blamed the downturn in sales due to the recession and also questioned why should they incur any new debt if they wanted to retire or sell?
While, I do not generally recommend that a retiring owner borrow money, I do believe that you have the run the business as though you will never sell it. Keep in mind that in a sale you normally keep the difference between what you sell it for plus what you get when you liquidate your balance sheet.
By upgrading certain equipment, your company could increase their sales and profits. A business that shows well and has up to date equipment is much more desirable and should command a higher sales price and being sold on better terms.
Even in a tuck-in, buyers will be attracted to buy the newer equipment. Keep in mind that many times part of the deal will include the buyer assuming the debt or payments on the new equipment. Even if they don’t want the equipment, new equipment is easier to sell. There is a glut of old equipment either on the market or stored in the back rooms of printers today. Buyers do not want a 15 or 20 year old press – it’s not worth even moving.
What equipment is desirable to a buyer? Answer – anything that makes the deal more strategic. For example, mailing, wide format, packaging or signage equipment is very desirable for a buyer who is not heavily in providing those products and services.
Recently, I have seen many commercial printers looking to acquire a company who has good digital printing, mailing or wide format capabilities. It’s quicker and less costly to buy someone already proficient in those services versus starting from scratch plus less risky as you will have revenue from day one.
You just might find that by investing $25,000 in new equipment, you may be able to sell your business for $50,000 more.