Machine Shop Due Diligence Check List

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by a searcher from University of Virginia-Darden - Darden School of Business
in Charlottesville, VA, USA

1yr ago

Machine Shop Due Diligence Check List

I'm working on an asset purchase of a machine shop with a large capital equipment component. Does anyone has a due diligence check list they can share? The equipment is composed of machinery used in manufacturing items like milling machines and lathes. There are also assignable contracts that will be included.

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reply by a searcher 1yr ago
from St. Cloud State University in Sheridan, WY 82801, USA

For machine shops specifically, here’s a starter framework you can adapt: 1. Equipment-Level Diligence Serial # + model inventory w/ condition notes Depreciation history (esp. for financing assumptions) Last maintenance & service logs (gaps = risk) UCC filings / liens tied to equipment (critical) Insurance coverage + exclusions (most don’t cover outdated CNCs) 2. Physical + Utility Infrastructure Power requirements vs. building supply Rigging/removal costs if relocating Floor integrity (often overlooked for mills/lathes) Ventilation / OSHA compliance (esp. if welding or cutting) 3. Contract Assignability Get every contract in PDF + redline the assignability clause Confirm customer notice and consent terms — some require novation Watch for exclusivity, volume minimums, and termination-for-convenience clauses If defense-related: ITAR / DFARS compliance = dealbreaker if missed 4. Revenue Risk by Machine Tie top 10 revenue-generating SKUs to the specific machine(s) used Validate downtime sensitivity does 1 machine = 30% of monthly revenue? Confirm availability of replacement parts + vendor support

reply by a professional 1yr ago
from DePaul University in Detroit, MI, USA

I think the due diligence on a "machine shop" varies drastically based on what is meant by "machine shop". Is this a high-volume manufacturer of low margin items for a small group (or one) OEM? Is this a job shop, making small volumes of specialty or high precision parts for a diverse group of customers? Does the business make its own proprietary product or is it making all parts to OEM specifications?