Anyone have experience with multiples for fabrication companies?

July 10, 2025

by a searcher from Northwestern University - Kellogg School of Management in Houston, TX, USA

I'm looking for perspectives on determining an appropriate multiple range for a fabrication company. I'm evaluating two opportunities, in different industries. They both fabricate products to order. There are some repeat customers, but there are no set contracts for repeat work and each order is somewhat customized. Sales are lumpy and must continuously be pursued. These are almost more like services businesses because the process is labor-intensive. There is little-to no automation involved at this point. Any insight on how to think about this is appreciated.

Reply by an investor
from The University of Chicago in Chicago, IL, USA

"Job shop" fabricators are difficult businesses to grow. Multiples are low-to-moderate values due to: i.) risk of one-time revenues and ii.) often negligible collateral values for aged machine tools. Your diligence focus should include a thorough analysis of the bidding function (# of bids / talent involved / success ratio / focus, if any, of the type of jobs bid / etc.). Compiling a strategy of what to do (automation needed, etc.) is the easy part. The hurdle is the target's ability (or lack thereof) to generate the cash necessary to fund the strategy. Your competition to acquire this business is most likely limited (required skill set of a potential buyer, etc.); use it to your advantage in deal structure and valuation.

Reply by a professional
from University of Southern California in North Palm Beach, FL, USA

If you're referring to metal fabrication companies, I've done quite a bit of research into that industry for some clients. We can zoom if you want more. Don't let anybody focus you too much on multiples, unless they can thoroughly help you understand what affects those.

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