Succession Planning for NJ Factories on the Way

A nonprofit organization that works to boost the efficiency of New Jersey manufacturers is branching into a new arena — succession planning.

The New Jersey Manufacturing Extension Program has just formed an alliance with the consulting firm Decision Associates to work with factory owners looking to retire and sell their businesses, said Bob Loderstedt, president of Morris Plains-based NJMEP.

The need for succession planning flows from demographics: many of the state’s 12,000 manufacturing firms are owned by baby boomers who are close to retirement age. Without a succession plan, the risk is that many will be sold “to a competitor who buys the company for its technology or customer list,” then shuts the business down and lays off the employees, Loderstedt said.

New Jersey has been losing manufacturing firms and jobs for years, and succession planning is a way to help stem the tide, Loderstedt said. He said studies have shown about 50 percent of privately owned firms in the United States will be sold by their owners in the next decade or so. MEP and Decision Associates will work in concert with the manufacturing companies and their lawyers, accountants and bankers, Loderstedt said.

Decision Associates is based in Erie, Pa., and will open an office in New Jersey to work with MEP clients, said company founder Donald Moore.

“Most business owners would prefer not to sell to a buyer who will move the company out of the area,” Moore said. “Especially among small companies, with $50 million in sales or less, the entrepreneurs tend to be quite loyal to their employees and they feel a commitment to their communities.”

Only about 30 percent of family-owned firms are passed down to the next generation, Moore said. The other options are selling the company to the employees, to another company in the same industry — known as a strategic buyer — or to a private equity firm or other investor.

“The opportunity to have a tremendous impact on the economic health of the state starts with keeping the companies you have, and that is under threat right now,” Moore said.