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      Many industrial companies are currently faced with the difficult decision of how to deal with underutilized or no longer profitable production sites.

      For example, selling a plant has become increasingly challenging due to excess capacity, shifting demand patterns, high fixed costs, and a selective buyer landscape. Closing a plant, on the other hand, is costly and operationally complex. Companies also risk reputational damage as well as the loss of valuable know-how and capabilities when a site is fully discontinued.

      When determining the most suitable future for a production site, whether through a sale, operational optimization, repurposing, or closure, it is therefore essential to take a structured and forward-looking approach. Site-related decisions are strategic decisions that shape the future direction of the business. Each option carries distinct implications in terms of value creation, risk, and feasibility of execution.

      1. Plant sale

      A plant sale may be the preferred option when a site no longer aligns with a company's strategic direction but retains marketable asset quality. Successfully executing a sale requires a realistic valuation, a clear understanding of the buyer landscape, and thorough preparation.

      2. Plant optimisation

      If a site remains fundamentally viable but requires structural adjustments, plant optimization may be the most appropriate course of action. Key considerations include capacity utilization, product mix, operational efficiency, and cost structure.

      3. Repurposing

      Repurposing should be considered when industrial operations are no longer economically viable, but the site itself continues to offer value and potential. Alternative uses may include different forms of industrial production, logistics operations, or third-party utilization.

      4. Plant closure

      Plant closure is typically considered a last-resort option. It is a complex and sensitive process that can involve significant one-off cost. Effective execution requires structured planning and a combination of HR, real estate, and stakeholder communication operational expertise.

      Our approach: A One-Stop Solution for Site Decisions

      We support companies throughout the entire lifecycle of site decisions, providing an integrated approach across the following areas:

      • Location- and feasibility assessment
      • M&A advisory
      • Property- and repurposing concepts
      • Restructuring, HR and transformation 
      • Governance, communication, and implementation

      Start your plant portfolio decision-making journey with a conversation.

      What to consider when making strategic location decisions

      Key question:

      Will we need this site in the future, and if so, for what purpose?

      • Does the site align with the company's long-term strategy?
      • Is the site relevant to the future product and market portfolio?
      • Is it a core, supporting, or non-core site within the network?
      • Are there strategic alternatives, such as consolidation or relocation?
      • What role does the site play within the global manufacturing footprint?

      Key question:

      Is the site economically viable, both today and over the long term?

      • Has current and future capacity utilization been assessed realistically?
      • Is the fixed-cost structure fully transparent, including labor, energy, and maintenance costs?
      • Is the required capital expenditure (CapEx) for sustaining or upgrading the site clearly understood?
      • How do productivity and competitiveness compare with other plants within the network or industry?
      • Has the site's sensitivity to demand fluctuations been analyzed?

      Key question:

      Can the site realistically be sold, or is a sale only viable in theory?

      • Is there a realistic universe of potential buyers for the site?
      • Is the current business and operating model attractive to the market, or does it only make sense within the existing organization?
      • Are there dependencies on customers, suppliers, or corporate functions?
      • Is the site carve-out ready from a legal, operational, and IT perspective?
      • Have alternative use cases been evaluated to enhance the site's attractiveness to potential buyers?

      Key question:

      What economic potential does the site offer beyond its current use?

      • Have alternative industrial or commercial use cases been identified?
      • Are the location, infrastructure, and site layout suitable for alternative uses?
      • Are any constraints, such as zoning regulations, environmental liabilities, or permitting requirements, clearly understood?
      • Has the business case for an alternative use been robustly assessed?
      • Could external partners and/or investors play a role in the site's future development?

      Key question:

      Have the people-related implications been realistically assessed and responsibly managed?

      • Has the workforce profile, including demographics, skills, and employee retention, been analyzed?
      • Have collective bargaining, labor law, and employee representation considerations been addressed?
      • Have social plans, outplacement, redeployment, and reskilling measures been considered?
      • Have the potential impacts on the employer brand and employee engagement been assessed?
      • Is an internal communication strategy in place and ready to be implemented?

      Key question:

      Is the chosen course of action financially, operationally, and reputationally manageable?

      • Have one-time costs, such as restructuring, closure, or transaction expenses, been quantified?
      • Have the ongoing impacts on earnings and cash flow been assessed?
      • Have reputational and stakeholder communication risks been evaluated?
      • Is the implementation timeline realistic and achievable?
      • Are governance structures, decision-making processes, and project responsibilities clearly defined?

      Key question:

      Are we ready to make a decision, or are we delaying action due to uncertainty?

      • Have clear strategic options been defined, including a "do nothing" scenario?
      • Has a decision paper been prepared for the board and/or executive management?
      • Has relevant external expertise, such as M&A, real estate, and HR advisors, been engaged at an early stage?
      • Have confidential stakeholder discussions taken place before any internal and/or public communication?

      Talk to us about your location options.

      Your contact

      Jens Schmoll
      Jens Schmoll

      Partner, Deal Advisory - Valuation

      KPMG AG Wirtschaftsprüfungsgesellschaft