Machine Shops

I am focused on deals in aerospace manufacturing and recently uncovered two targets for sale that loosely fit my criteria. They are both machine shops that produce low complexity metal parts for oil/gas, aerospace, and automotive industries. I say "loosely" because I am more focused on high-tehcnology aerospace components with strong intellectual property whereas these machine shops are producing low-tech forged metal parts, housing, assemblies, etc.

Financials look great. Both targets are within LMM bounds of $1-5m EBITDA, 15-20% margins, and somewhat diversified QoE. Both targets are also geographically dispersed enough where a roll up strategy could drive optimization through revenue synergies via geographic expansion and cost synergies by eliminating duplicative overhead.

I'm wondering if anyone else is searching for machine shops or has come across them in the past and would be willing to share stories.

On its surface, these seem to me like businesses that are ripe for scale plays where each machine shop is limited by its capacity and utilization as well as geographic footprint.

Research shows that there are 20,000 machine shops in the US, suggesting these are highly commoditized businesses. With no IP or key differentiation, it appears these companies are best suited for long-term holding strategies with equitable profit distribution to owners and shareholders versus the more PE savvy approach to buy, build, and sell as the primary lever.

Please share your thoughts and let's connect for "virtual coffee" to discuss more. Thanks!