Sell a Manufacturing Business
Who buys small manufacturing companies, what buyers look for in a fabrication or machine shop, and how Mondsegel acquires manufacturers particularly in Texas and Oregon.
Owners of small fabrication shops, machine shops, and equipment manufacturers often assume the only buyer is a competitor. In practice there are several kinds of buyers, and they look at the same shop floor in very different ways.
Who buys small manufacturing companies?
- Competitors and strategic buyers want your customers, capacity, or capabilities. They may pay well, but they often consolidate operations, move work, or retire your name.
- Private equity funds look for platforms or add-ons and usually plan to resell within a few years.
- Individual buyers and search funds are often first-time owners, frequently financing the purchase with an SBA loan and a seller note.
- Long-term holding companies and family capital buy to keep the business running as it is, with its people, for many years.
- Your employees, through a management buyout or an ESOP, when a strong internal team exists.
What buyers look at in a manufacturing business
Customers and end markets
Buyers want to know who you sell to, how concentrated that revenue is, and how exposed it is to a single industry such as oil and gas, construction, or agriculture. A diversified customer list across several end markets is worth more than a single large account.
Equipment and capital needs
The age and condition of your machines, the maintenance records, and the capital spending needed over the next few years all affect value. A buyer will subtract the cost of a CNC replacement or a building repair they see coming.
People and skills
Skilled machinists, welders, and programmers are hard to find. Buyers look at tenure, wages relative to the local market, training, and whether knowledge sits with one or two people. A shop where the owner is also the best estimator and the main customer contact will be valued with that risk in mind.
Quality systems and certifications
Documented quality processes, and certifications your customers require, reduce risk and can open doors to better work. Keep inspection records and audit results organized.
Quoting, backlog, and margins
How you price jobs, how much backlog you carry, and margins by customer or product line tell a buyer whether earnings are repeatable. Proprietary products usually command more value than pure contract or job-shop work.
Facility and environmental
Expect questions about the building, the lease or real estate, and environmental history. Many buyers and lenders will order an environmental site assessment, so it helps to know what is in your records.
What we look for
| Industries | Metal fabrication, machining, and industrial equipment |
|---|---|
| Revenue | Less than $5 million |
| EBITDA | Approximately $100,000 to $1 million |
| History | Well established, five years or more |
| Geography | Texas and Oregon |
We are not a competitor looking to consolidate, and we are not a fund planning a resale. We intend to own for the long term, and we seek to keep the team in place and invest in the equipment and people that keep a good shop competitive. Clear, timely answers at each stage, with price and terms set out in writing before formal diligence.
Getting ready
Start with clean monthly financials, an up-to-date equipment list, and a clear picture of revenue by customer. Our preparation guide covers the rest, and our valuation guide explains how buyers arrive at a price.
Own a fabrication or machining business?
We would welcome a confidential conversation. Thirty minutes, no financials needed, and no obligation.