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Valuation of Manufacturing Company

The manufacturing sector​ has experienced steady decline over the past 10 - 15 years, faced with increasing competition and cost pressures from emerging economies and larger globally based manufacturing companies.

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The sector has seen the exit automotive manufacturing and the scale back of many other larger sectors such as steel manufacturing, petrochemical processing and household appliance manufacturing.

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However the industry has stabilised it's decline by focusing on automated processes, niche market products, high value products manufacture and precision and advanced manufacturing.

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Supply of experienced management and a skilled workforce may influence the growth of some manufacturing sectors, and this may impact growth and business valuations.

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Key Drivers of Manufacturing Valuations

The valuation of a manufacturing company can be as diverse as the sector itself, however there are some key factors that influence profits and hence business valuations. 

 

These include:

  • Market size and market share

  • Diversity of customer base

  • Cost of manufacture and scale

  • Condition of assets
  • Use of technology to automate processes
  • Level of automated reporting and integration with key management functions.
  • Staff structure and documentation of roles and KPI's
  • Certification to quality, OH&S and environmental standards.

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EBITDA Margins range from a very low 4%-5% to as high as 25%, depending on the level of industry competition, technology and automation and process efficiency.

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EBITDA Multiples for most SME-sized manufacturing companies will vary considerably across sub-sectors, and will be heavily influenced by size and scale.  Typical EBITDA Multiple ranges we have observed are:

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  • Revenue of $1m - $10m: 1.5x - 3.5x

  • Revenue of $10m - $20m: 3.0x - 5.5x

  • Revenue greater than $20m: 5.0x - 6.5x

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Key Industry Statistics

According to IBISWorld, key statistics for the industry include:

  • Revenue growth contracted by 1.5% pa for 2012 - 2017, with total revenue of $386bn in 2017.

  • The number of manufacturing businesses also declined by 1.1% pa for the same period.

  • Contributes less than 5% to our GDP.

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We have collated industry performance statistics based on ABS data and detailed them in a whitepaper, which can be downloaded from the link below.

What Makes a Business Highly Valuable?
SME Performance Whitepaper

Our Business Valuation Experience

Our business valuation experience in the manufacturing and process industries has included most sectors, including valuations for:

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  • Timber mill processor

  • Biscuit manufacture

  • Sauce and condiments manufacture

  • Medical device design and manufacture

  • Metal products manufacture

  • Retrofitting four wheel drive business

  • Kitchen appliance manufacturing and wholesale

  • Engineered components manufacture to transport and construction sector

  • Process measurement equipment manufacture

  • Modular house and building construction

  • Modular water manufacture for high rise building industry

  • Metal polishing business

  • Metal tank manufacturing and engineering design

  • Pharmaceuticals and health products manufacture

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