Machine Shop Due Diligence Check List

June 04, 2025

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

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
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logs (gaps = risk) UCC filings / liens tied to equipment (critical) Insurance coverage + exclusions (most don’t cover outdated CNCs) 2.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 searcher
from Santa Clara University in Texas, USA

For Machinery, you should get the assessment done by a third party valuation company. Usually lenders do that as part of their Due Diligence before closing, that can then be used for negotiating your offer. Going with lender assessment helps you save the costs and can skip valuation from your end. However its usually one of the last few steps on the lender part, so having this called out on LOI is sometimes helpful to avoid the surprises incase valuation turns out low for seller.

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