Emergency Succession, Changing Markets, Strategic Pivots and Selling a Manufacturing Business
Michael Horn, Jr. wasn't expecting to become president of the family's food processing machinery company on the day his dad had a bike accident, but it was the second emergency succession in the company's fourth generation history.
Fortunately, Michael had experience as an army officer, trained in emergency leadership, and had three years of working alongside his dad while making progress in organizational improvements.
The company had survived numerous challenges, including the GFC just a few years before Michael's assumption of leadership, and an earlier acquisition had positioned it for growth. Michael had watched a similar company navigate the journey of an exit and knew that the time was right.
In our conversation, he talks about the process of exit and offers recommendations for other family-owned manufacturing companies considering a range of options as they evaluate business strategy. Among other topics, he discusses the value of a board with independent directors.
Connect with Michael for insights on exiting a family-owned manufacturing company.
AC Horn Manufacturing still carries Michael's Family Name |
First-Hand G4 Story of Selling the Family-Owned Capital Equipment Manufacturing Business - Michael Horn, Jr. on Industrial Growth Institute Episode 70
Episode Recap
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."
Outline
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
Preparing For An Exit, or the Next 100 Years
Buyers' behaviors are shifting quickly. Industrial sales and manufacturing marketing teams must adapt radically and speedily. Traditional approaches are failing.
That's what I've outlined in this recent paper.
