Wiring Harness News WHN Sept-Oct 2020 WHN Sep-Oct 2020 - Page 4

4 SEPTEMBER/OCTOBER 2020 Wiring Harness News INDUSTRIAL INFO-TAINMENT The Brokerage Scam By Loren Smith _____________________________ Harness manufacturers often ask me about frequently receiving letters or emails from entities claiming to have a buyer interested in acquiring their company. Are these communications legit, they want to know. In almost every case, the answer is no. Instead, these letters and emails are being sent by disreputable individuals and firms who are simply fishing–– with a very wide net. The senders do not really represent a buyer––and they might not even be knowledgeable about the wire harness industry. They are simply mass producing blind inquiries to thousands of companies and hoping for a response. Their business model consists of professing to have a buyer, and then, if someone responds favorably, scrambling to send thousands of additional letters or emails to companies that might conceivably consider acquiring a wire harness company. In this second wave of communications, the scammers claim to represent the potential seller who took the bait. The shakiness of this “enterprise” explains what happened to a harness owner I know. She told me she had received a letter from an individual claiming to have a buyer for her business––a buyer who had targeted her industry … a buyer who Print a bar code label only Restrict an operator from Identify the operator for Verify the bar code label if the harness passes? altering the program? labels and data collection? is applied to the harness? Transfer programs to tester Send alert if harness is Connect to a network for file Work as a standalone system via a memory card? removed prematurely? transfers and data collection? without needing a computer? Loren Smith CEO Blue Valley Capital had selected her company as a perfect fit for its acquisition strategy. But when she contacted the author of the letter asking for a description of the buyer, she never received an answer to her question. Apparently, the scammer was unable to find a potential buyer in a reasonable time. Game over. It is quite fair to label the folks who engage in these practices as scam artists because they bring nothing to the table and they are misrepresenting or lying to both parties. Without industry knowledge, without buyer relationships, without the ability to put together a CIM (confidential information memorandum), and without any knowledge of the M&A process, in the very unlikely event they do put two parties together, the resulting price will not approach the company’s true value. Although these folks provide no value added and, in some instances, do serious harm, nothing they do is illegal––which is why, unfortunately, this unsavory practice exists in so many business sectors. We are awash in folks trying to make a living in this fashion. Practically every harness owner I have ever dealt with is barraged with these kinds of letters, and my advice is to put these letters where they belong: in the round file. Loren Smith can be reached at lms@blvcapital.com or www. bluevalleycapital.com.