Industrial Growth Institute

Selling a Family Owned Manufacturing Business - Michael Horn Jr.

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Selling a business after a great run. Finding the right buyer, making the right decision, doing the deal right - Episode 70 of the Industrial Growth Institute Podcast with Michael Horn, Jr.

Summary

This week, Michael Horn, Jr., former CEO of AC Horn, a fourth-generation family-owned food processing machinery builder, is in the studio chatting about the journey to a business sale. After military service and a stint as a ski instructor, he joined the struggling family business in 2011 and became CEO unexpectedly in 2014 when his father died in a bicycle accident.

Michael shares details of the transformation he helped lead, turning a company weakened by the GFC into an automated, precision, contemporary manufacturer, and shifting from fabrication and component sales to systems. Fun fact - 80 to 90 % of nut butters made in North America ran through at least one AC Horn machine.

Michael speaks in detail about changes in buyer behaviors, the growth of buying teams, the impact of COVID-19 & PPP funds on capital equipment spending cycles, and succession planning. He offers tips for companies considering an exit, including:

  • Hire professional M&A advisors
  • Work outside the family business first to gain perspective and leadership experience
  • Maintain clean financial records and establish proper organizational structure with defined processes

    • The bottom line from Michael's perspective is simple - "Treat the business as an asset, not an heirloom." This enables you to make informed business decisions, including an exit if and when that becomes appropriate. In Michael's case, he watched another family successfully exit, and he planned to strategically emulate them. In early 2024, AC Horn was acquired by Probat.

    Takeaways

    • Experience in the military teaches important business skills and perspectives
    • Succession planning is critical
    • Work outside the family business is an important preparatory step
    • Generational refresh can be important. Michael Sr. diversified from metal fab into machinery and Michael Jr. modernized the shop and business approach
    • Independent advisors and/or directors can guide a company through strategic transitions and exits
    • Bigger transactions (system sales) may be beneficial to both seller and buyer
    • International markets and competition have changed significantly in the past 15 years
    • Consolidation of domestic suppliers, often through earlier exits, has changed the landscape for manufacturers
    • COVID and PPP money may have distorted capital equipment investment cycles
    • Proper financial reporting is necessary to prepare for any transaction
    • Managing the business and diligence is taxing
    • Professional M&A advisory is critical to navigate the exit journey and achieve an appropriate outcome

      • Takeaway Quotes from Michael Horn

      • "Think about your business like it's an asset, not an heirloom."
      • "Assets have value. Values go up and down."
      • "You may think that you know your business, but you'll have no idea how to sell it."

        • Learn more about the Horn family legacy and machines: AC Horn

        LinkedIn: Michael Horn, Jr. and Ed Marsh

        Twitter: Ed Marsh

        Instagram: Ed Marsh

        YouTube: @EdMarsh

        Show Transcript 

        Chapters

        00:00 The Importance of Legacy in Family Businesses
        02:16 Michael Horn's Journey in the Family Business
        06:33 Transitioning Leadership: A Personal Story
        17:11 Navigating Crisis and Succession Planning
        23:52 Adapting to Market Changes and Buyer Behavior
        30:20 Building Strong Supplier Relationships
        40:47 The Art of Relationship Building in Sales
        43:05 Market Dynamics and Sales Strategies Post-COVID
        46:19 Advice for Machinery Companies Facing Slowdowns
        50:06 The Journey of Selling a Family Business
        53:48 The Importance of M&A Advisors
        57:39 Post-Sale Reflections and Employee Communication
        59:30 Preparing for Future Business Transactions
        01:02:34 Advice for G3 and G4 in Family Businesses
        01:06:08 Resources for Family-Owned Businesses
        01:09:30 Final Thoughts on Liquidity Events
         
        You're Marketing and Selling to YESTERDAY'S Buyers!
         
        Buyers' behaviors are shifting quickly. Industrial sales and manufacturing marketing teams must adapt radically and quickly. Traditional approaches are failing. We need to change, but first we need to understand how buyers are changing, how their behaviors are evolving, and what that means to us.
         

        Read more from Ed's recent paper on these critical changes.

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        Industrial Growth InstituteBy Ed Marsh Consulting