How Operational Improvement Helped NTE Double a Buyer's Offer
How targeted operational improvements transformed a specialist engineering manufacturer, increased profitability and maximised shareholder value ahead of a successful business sale.
By QBA
Radio telescope projects were one of the highly specialised sectors supported by NTE's ultra-high vacuum engineering.
Many business owners preparing for retirement focus first on finding the right buyer.
In reality, some of the greatest opportunities to increase business value occur before the company ever reaches the market.
NTE provides a strong example. By improving operational performance, increasing manufacturing capacity and strengthening profitability, the underlying business became significantly more valuable - ultimately contributing to the purchaser doubling their initial offer.
In reality, some of the greatest opportunities to increase business value occur before the company ever reaches the market.
The Business
NTE produced Ultra High Vacuum vessels for three highly specialised sectors.
Much of its work involved manufacturing vessels for particle physics research, including projects for CERN, Rutherford Appleton Laboratory and other international physics research institutes.
The company also produced chambers for international radio telescope projects and supplied equipment manufacturers operating within the silicon wafer and nanotechnology sectors.
Its capabilities covered the complete manufacturing process, including designing pressure vessels, machining and fabricating components into assemblies, and building the finished products.
The Challenge
NTE's two directors wanted to retire and ultimately sell the company.
Before taking the business through a sale process, however, operational performance needed to improve in order to strengthen the company and increase its value.
Nigel Brown was brought into the business to restructure the operations and improve overall performance.
The objective was to create a more efficient and profitable manufacturing operation while establishing additional capacity that could support further sales growth ahead of the proposed sale.
Improving Operational Performance
The first priority was to create greater visibility and control across the manufacturing operation.
Nigel implemented a series of operational KPIs, helping the management team measure performance more effectively and identify opportunities for improvement.
Several issues within the company's production planning system were also resolved.
Particular attention was given to manufacturing efficiency and reducing downtime within the machining areas.
Together, these changes allowed NTE to increase output and create additional manufacturing capacity while simultaneously reducing its direct labour expenditure.
Turning Capacity Into Growth
Creating additional manufacturing capacity was only part of the opportunity.
Once the operational improvements were in place, Nigel worked alongside the Managing Director to increase sales and make productive use of the additional capacity.
The combination of improved manufacturing efficiency and increased turnover significantly strengthened the profitability of the company.
Results
Measurable impact.
- Increase in factory output
10%+
Increase in factory output
- Reduction in direct labour spend
20%+
Reduction in direct labour spend
- Turnover achieved
£2M
Turnover achieved
- Purchaser doubled their initial offer
2x
Purchaser doubled their initial offer
Factory output increased by more than 10%, while direct labour expenditure was reduced by over 20%.
At the same time, turnover increased to £2 million and the company's profitability improved significantly.
The stronger operational and financial performance had a direct impact on the value of the business. During the sale process, the purchaser ultimately doubled their initial offer.
Nigel then managed the due diligence process and worked with the company's solicitors on the Sale and Purchase Agreement.
The transaction completed successfully, enabling both directors to retire.
The Bigger Lesson
Preparing a business for sale involves much more than simply identifying a potential buyer.
Businesses with efficient operations, reliable management information, strong profitability and genuine capacity for growth are inherently more attractive to potential acquirers.
Improving the underlying performance of a company before taking it to market can therefore have a significant effect on both its saleability and its ultimate value.
The NTE project demonstrates how focused operational improvement can create measurable shareholder value while simultaneously leaving the business in a stronger position for its next stage of ownership.
Next Step
Preparing your business for growth, restructuring or sale?
QBA provides experienced, hands-on leadership to help businesses improve performance, navigate change and create long-term value.
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