Most owners we meet do not immediately decide to sell.
John MosserSuccession planning is a thought that enters their mind quietly as something they should think about, gets pushed aside for a quarter or two, comes back when a competitor sells, gets pushed aside again when a big customer order lands, and eventually settles into the back of their mind as something that will probably happen in the next few years. There is rarely a clear moment when the decision is made. It’s oftentimes just a slow shift from “not now” to “maybe soon.”
This article is for owners who know there will come a time to sell the business and want to prepare accordingly. The goal is to help you understand what you can control to influence value, what you cannot, and where to focus over the years between now and a potential transaction.
What You Can’t Control: The Market
The macroeconomic environment and the health of the M&A market for metal finishing businesses will undoubtedly shape your outcome. Interest rates, financing availability, private equity activity, and strategic buyer appetite all influence your business’s value.
Timing the market is harder than it looks. Transactions take months from initial conversations to close, so you cannot decide to sell on a Monday and capture that week’s market. The more common challenge is misalignment. You might not be personally ready when the market is extremely healthy, and the year you are ready might fall in a softer environment. Owners who try to time the market often end up selling too early or waiting too long, and neither outcome usually beats the result of being well prepared.
Pay attention to the market, but do not let it be the sole factor driving transactional or operational decisions. The factors below are the ones you can actually influence, and they tend to matter more than guessing the cycle correctly.
What You Can Control and Where to Focus Years Before a Sale
The list below is not exhaustive, but in our experience, these are some of the most common topics that come up in our conversations with owners. None of them can be addressed in the months leading up to a sale, and all benefit from a multi-year runway.
Growth and Scalability
This belongs at the top of the list because it is one of the biggest value levers in a transaction, but not always top of mind when a sale isn’t on the immediate horizon. Buyers pay materially more for growing, scalable businesses than for flat or declining ones.
It is worth taking an honest look at where your business sits today. Are you on a growth trajectory that buyers can credibly expect to continue, with capacity, customer programs, and sales activity that support the story? Or is today’s growth likely to level out before you go to market? The same business with $4 million of EBITDA might sell for 5x if it has been flat (or declining) for three years and the owner is no longer investing, and 7x or higher if it has been growing meaningfully and there is a credible plan to keep going. That admittedly oversimplified example translates into $8 million of value for a seller.
Where there is room to diversify, doing so over a multi-year window is one of the more productive uses of the pre-sale runway. The work to add new customers and grow the rest of the book is also growth, meaning the same effort that reduces concentration risk generally adds value through scale at the same time.
Some owners begin managing for short-term profit in the years before a sale, deferring growth investments because they will not see a return on those investments before they exit. Worse, some deferred maintenance capex begins to erode value. Buyers underwrite future earnings expectations, and a business visibly optimized for cash extraction signals that an acquirer will need to do all the work and make the investment to achieve growth.
Why it matters: Owners who treat the years before a sale as a period to harvest cash rather than build often find themselves in a lower valuation bracket, sometimes without ever realizing the opportunity cost.
Customer Concentration
As a general rule, a single customer above 20-25% of revenue draws scrutiny, and concentration above 40% will cause some buyers to pass entirely or price the risk aggressively. That said, concentration is not always practical to avoid. In specialty applications and tightly defined niches, the customer base for what you do is naturally limited.
In those cases, the focus shifts to demonstrating durability and that the business isn’t going anywhere anytime soon. This means long-term contracts where possible, but also the practical and operational forces that make the relationship hard to displace, such as no viable competition, process qualifications or unique IP that took years to earn, engineering involvement on the customer’s side, capital tied to specific programs, or production locations that complement the customer’s footprint.
The point is to make smart capital decisions and ensure you are positioned to realize the return, either through your ongoing operations or through credit from an acquirer.
Where there is room to diversify, doing so over a multi-year window is one of the more productive uses of the pre-sale runway. The work to add new customers and grow the rest of the book is also growth, meaning the same effort that reduces concentration risk generally adds value through scale at the same time.
Why it matters: A business with one customer at 45% will trade at a meaningfully lower multiple than the same business with no customer above 15%, even with identical earnings. Where concentration is structural, demonstrating its durability is the work. Where it is not, diversification is a material contributor to increased value.
Capital Expenditure Timing
Major capital investments raise a question every owner thinking about a future sale should ask before signing the PO. Who is going to realize the return, me or the buyer?
A new line, process, or capacity expansion typically takes a year or more to commission and another year or two to ramp. If you are three years out, that investment has time to show up cleanly in the numbers. If you have less time to complete a transaction, you should be more thoughtful to ensure the investment doesn’t become a sunk cost. Deal structure can sometimes bridge the gap. We have seen acquirers pay for recently completed capex (or part of it), build an earnout that captures the projected contribution, or otherwise structure consideration to share in the value of an investment that has not yet fully materialized in the financials. It is not the default outcome, but it is a real path in the right circumstances.
Building a credible second layer of leadership generally takes two to four years. It involves hiring or promoting people into leadership roles and giving them time and reps to run those roles, including taking ownership of customer relationships and making decisions without the owner in the room.
The point is to make smart capital decisions and ensure you are positioned to realize the return, either through your ongoing operations or through credit from an acquirer. Speculative or questionable investments late in the pre-sale window are most likely to be discounted, because a buyer will not pay for a story they don’t believe or cannot verify.
ERP and shop management systems are a useful example. With enough runway, the investment is a strong move, driving cleaner financials and operational efficiency, and giving management visibility to make better strategic decisions. Done in the months before a transaction, the same investment can be a waste. The system is mid-implementation during diligence, the data is not yet clean or comparable over time, and a strategic acquirer may want the business migrated to their system anyway. The timing can make it either a value driver or a costly disruption.
A Successor and a Management Layer Beneath You
Many metal finishing owners are deeply involved in their business. They manage the largest customer relationships, make the technical calls on the hardest jobs, sign off on quotes, and are typically the first point of contact when something goes wrong. That involvement becomes a liability the day an acquirer takes over. The question buyers ask, in some form, is: what happens to this business if the owner is gone? If the honest answer is “things get hard for a while, and we lose customers,” it directly shapes both the price and the deal structure.
Building a credible second layer of leadership generally takes two to four years. It involves hiring or promoting people into leadership roles and giving them time and reps to run those roles, including taking ownership of customer relationships and making decisions without the owner in the room. Rushing this last minute rarely works. Hiring someone six months before a sale often signals to a buyer that the move was made for the transaction rather than for the business. Potentially worse, an acquirer who would have been comfortable buying with the owner-operator in place may now be inheriting a leader they did not select, do not yet trust, and may need to replace at their own cost.
How this affects deal structure:
- An owner-dependent business frequently should expect offers with some structure (not 100% cash at close). Buyers will require rollover equity, earnouts, multi-year employment agreements, or seller financing to keep the owner aligned with post-close performance
- A business with a capable team running it can support a much cleaner walkaway structure: more cash at closing, shorter transition, less consideration at risk
Environmental Matters in Order
Environmental compliance is one of the few areas where the upside is limited, but the downside can derail a deal entirely. A clean record adds little to valuation. An unresolved issue can take a deal off the table or trigger a discount well beyond the actual cost of remediation. Make sure your permits are current and accurately reflect what you actually do, have a documented plan for any open issues, even if they are not urgent, and address legacy concerns proactively rather than waiting for a buyer’s Phase I to surface them.
Operational Redundancy
Most shops have at least one or two single points of failure. It could be the one person who really knows the line, the one piece of equipment that takes down meaningful revenue if it goes down, the one supplier for a critical chemistry, or the one contact who holds half the customer relationships in their head. Buyers look for these in due diligence, and when they find them, they price those risks accordingly. Building redundancy through cross-training, documenting processes, qualifying second sources, and maintaining backup capacity is usually a modest investment compared to the discount its absence would otherwise produce in the context of a transaction.
The Work Starts Before the Sale Process
The most important decisions in a sale are made years before the sale itself. Building a team, addressing concentration, cultivating a growth mindset, and getting environmental and operating matters in order all take time that is not available in the months before a transaction. If you are in that 2-5-year window, the most useful step is to take an honest inventory of where you stand on the items above and focus on the two or three that would move the needle most.
John Mosser is Managing Director at Triscend Partners. For questions about this analysis or to discuss your specific situation, please contact him at john@triscendpartners.com or visit www.triscendpartners.com.
