Diligence injection molding

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February 02, 2024

by a searcher from Ohio State University in United States

Considering a target in the industry and about to submit LOI. What are some considerations for manufacturing businesses specifically? How have deals fallen apart, what specific issues have you run into that led to a larger valuation gap, what should we look at from a product, equipment, talent diligence perspective?

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Reply by a searcher
from The University of Chicago in Atlanta, GA, USA
Maintenance records for the equipment and/or a good estimate of date and cost for equipment repair/replacement. Check the balance sheet for capex to see how often equipment is being purchased/replaced, because those big, lumpy expenses won't show up on the P&L.

Get as much detail as you can on the level of talent currently in place - will you have to manage heavily on-site to keep things going, or is the team and operation mostly self-sustaining with some guidance and input from you?
commentor profile
Reply by a professional
from University of Nottingham in London, UK
On the revenue side key things to establish are a) is the revenue recognised in line with GAAP; b) the weighting of revenue between recurring, re-occurring or one-off.


On the gross profit side the key things to establish in manufacturing are how secure the GPM is, whether cost increases can be effectively passed on to customers (or whether there would be a lag) and whether there is anything exceptional that has distorted performance from the norm.
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