Sell-side readiness lifts a machining firm's EBITDA case by €90,000

Situation

A precision-machining company in Rüsselsheim am Main, 45 staff, about €7.8 million revenue a year, making turned and milled parts for automotive and plant-engineering customers. The owner, 61, wanted to sell within eighteen months and had two unsolicited approaches, one from a strategic buyer and one from a small investor group.

Reported EBITDA, meaning earnings before interest, tax and depreciation, was about €820,000 a year. That figure carried things a buyer would question: the owner paid himself well above a market salary, a one-off legal dispute had cost €45,000 the previous year, and the workshop was rented from the owner’s own property company below market rent. Any buyer’s adviser would find these within a week and count them the buyer’s way.

Approach

Due diligence is the examination a buyer runs on a company before signing. Sell-side preparation runs that examination on yourself first, so the buyer finds a tidy house and the story stays yours.

First, normalisation of two years of figures: we restated the accounts to show what the business earns for an owner who is not there. The salary above market added back about €60,000 a year, the legal cost €45,000, a private vehicle in the books €15,000, and the below-market rent took off €30,000, because a buyer will pay market rent. Net effect: about €90,000 a year, taking normalised EBITDA to about €910,000. Each adjustment has a justification and a document behind it.

Second, the data room, the folder set a buyer’s advisers ask for. We built 96 documents in nine folders: corporate, financial, tax, contracts, employees, property, operations, insurance, and legal disputes.

Third, a 28-page fact book describing the company the way a buyer reads it: customers and concentration (the top five accounts are about 48% of revenue), machines and their age, order backlog, and the bridge from reported to normalised EBITDA.

The tax adviser (Steuerberater) produced the tax folder and reviewed the tax effect of every adjustment, and the lawyer handled the contracts and disputes. Nothing we wrote is tax or legal advice, and both advisers cover their own ground.

Result

In this scenario both buyers received the fact book and data-room access in the same week. Their first-round lists ran to about 20 questions each, against the 80 to 120 a cold process usually brings, because most answers were already in the room. Both buyers worked from the normalised €910,000 rather than the reported €820,000. At the 4.5 to 5.5 times EBITDA small machining firms in the region have sold for, that difference is worth roughly €400,000 to €500,000 of enterprise value. The strategic buyer’s indicative offer of about €4.6 million sat within that range.

What it cost

The engagement cost €12,500 as a fixed price, quoted before the work started. That bought the two-year normalisation with its bridge, the 96-document data room, the 28-page fact book, and a half-day preparing the owner for management meetings. Delivery took seven weeks. The work is covered by our 100% money-back guarantee: full refund on request within 14 days of delivery.

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