Buying a business for its machinery

When business is good, it’s natural to want to increase capacity. But when it comes to purchasing new machinery to allow you to fulfil your potential, the costs involved can seem astronomical. A solution might be to buy a business for its machinery.

A large number of businesses for sale will come complete with machinery that could help you to increase your output, improve your production and manufacturing processes, update your equipment or add a completely new capability to your business. Instead of buying machinery ‘off the shelf,’ as it were, seeing the machinery in action before you purchase it can bring significant benefits and reduce risks. You may also have the opportunity to cut costs dramatically by buying a business, and its machinery, out of administration.

For first time buyers, and those new to a particular business area requiring machinery, purchasing a business for its machinery ensures they have all the required kit from the outset. They can establish themselves in their chosen market as a serious, well-equipped business with all the necessary capacity to compete.

A whole new capability
The decision to buy a business for its industrial equipment can add an entirely new offering to your portfolio of products and services. One firm that has done just this in recent weeks is engineering company Supacat.

The Devon-based business, which has previously specialised in projects such as the new RNLI Shannon Class Lifeboat and other light and medium engineering projects, now has the ability to manufacture large structures thanks to its purchase of Blackhill Engineering Services Ltd.

Some 28,000 sq. ft. of workshop space fitted with machinery was included in the deal, alongside machinery that provides a 60-tonne lifting capability.

The managing director of Supacat, Nick Ames, said: “The acquisition of Blackhill positions Supacat to collaborate on significantly larger renewable energy, nuclear and marine projects in the South West.”

WEC Group, another engineering firm based in the UK, has also taken the approach to expand and build on its capacity and capabilities by buying firms and their machinery. In 2005 WEC bought Precision Engineers to add to its internal machining capability; in 2008, 5750 Components Ltd was purchased, strengthening WEC’s laser capabilities and in 2010 its purchase of Nutter Aircrafts Ltd added capacity to its machine shop.

Location, Location, Location….and other considerations
Supacat made the decision, following its purchase, to relocate some of its marine and renewable projects to the former Blackhill site, which suited them just fine as the site is local. However, location is a major factor to consider when looking to purchase a business for its machinery, as it can be highly expensive and sometimes downright impossible to shift heavy machinery from site to site. Make sure you’re happy with the location of your prospective purchase before taking the plunge.

In fact, when buying a business that comes with machinery, your due diligence process needs to be thorough and focused on that machinery to ensure that the machines are up to date and in good working order. Whether the machinery is under warranty and whether there is any outstanding debt owed against the machinery should also be taken into account. In addition, you’ll need to find out if the machinery is due for servicing and what that servicing entails.

Safety and insurance should also be considered when looking to purchase a business for its machine equipment. Look into whether those operating the machinery will need specialist training, supervision or workwear and what the insurance implications will be for adding the machinery to your existing operations.

A good way to avoid some of these complications is to buy a company that is synergistic with your business. You can avoid the time and effort it takes to choose the right machinery if the business you purchase is running the machinery you are already familiar with and are already using yourself. This is particularly relevant for buyers who simply want to increase their existing output.

Grabbing a bargain
Buying a business out of administration, with the added bonus of acquiring its machinery at a knock-down price, can be a realistic option if you’re willing to take risks, keep your ear to the ground and move fast.

A distressed sale can be a great opportunity to take on machinery to help you expand or increase output - adding machinery to your existing operation without committing to enormous outlays of cash for brand new units. One firm that has recently aided its expansion in this way is Accraply Europe Ltd, which, in July, bought the assets of labelling machine firm Harland Machine Systems Limited from administrators FRP Advisory LLP. Although the final price paid for the troubled firm is not known, sources claim the purchase was made “at a substantial discount to market value.”

Harland Machine Systems served some of the same industries as Accraply, so there were clear synergies in place to ensure the deal made perfect sense for the buyer. Seamus Lafferty, the president of Accraply stated: “This acquisition supports our long-term strategy of developing and expanding our presence in Europe.”

On the other hand, buying a business and its machinery out of administration can simply be a great money spinner for any buyer, particularly if you take the time and effort required to get the very most out of your newly acquired assets.

Conclusion
Whether your motivation for buying a business for its machinery is to add capacity, speed up output, add a whole new capability to your business or simply benefit from a good deal by buying a troubled business, there are opportunities out there if you do your homework.

A due diligence process that focuses on the machinery is vital and it pays to be very clear about the types of machines you are looking for in advance. If the right opportunity does become available, buying a business for its machinery can be an ideal alternative means of upping your output by simply bolting on a successful existing operation.

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