Manufacturing & Industrial · Buyer guide
Buying a Machine Shop / CNC Manufacturing business
Published · Reviewed by The Diligence Standard Team · Updated
a Machine Shop / CNC Manufacturing business can look attractive on a summary P&L while the operating details underneath it change the cash flow, transferability and capital a buyer will actually own. Diligence should connect the reported earnings to the business-specific drivers that create them.
How the business works
Machine utilization, customer concentration, labor skill, quoting accuracy, scrap/rework and equipment CapEx determine earnings quality.
Risks to test
- Customer concentration
- Aging CNC equipment
- Skilled machinist shortage
- Owner quoting/programming
- Quality certifications
- Backlog margin
Evidence to request and reconcile
- Job costing
- Machine hours
- Equipment/maintenance
- Customer revenue
- Staff/certs
- Scrap/quality reports
Decision questions
- What equipment replacement is due?
- Who programs/quotes complex jobs?
- Which customers dominate spindle time/profit?
- What is true scrap/rework?
- Is backlog profitable?