I'm not finding a lot of good relevant comps for machine shops in the US for the last couple of years.
For the leads I'm getting from my funnel, multiples on 1-2MM EBITDA are in the 5-6X range, which seems high? It really forces you to the edge of DCR that most SBA banks are looking for.
Curious to see what everyone's experience is.
Multiples for Machine Shops in the sub 2MM EBITDA Range?
by a searcher from University of Massachusetts at Lowell
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3x-4x is market range. Higher than this and it's probably got an in house product, or highly protected aerospace/defense customer base. Lower than this is what you should offer. I've walked on some "good" add-ons that want 6x EBITDA on $1.6M EBITDA. You should too.
Machine shops in general have owners that will dip in and make parts themselves, even at larger outfits, to cover up problems. Is your target one of them?
This can be a difficult industry, even if you have experience as a machinist, engineer, etc.
Don't overpay. The Orderly (or even Forced!) Liquidation value of the equipment is probably the right price for most shops, though some may warrant some goodwill. Take the deal to an ABL shop and see what they will finance on the equipment, that could be a good starting offer. They're going to discount the Orderly Liquidation value by maybe 20%+. Production shops should be more valuable IMO than "job shops".
I personally find the industry fun and rewarding, but tread carefully on price. Target 20-30+ employees for best results.
DM if you or anyone here wants to chat machine shops. I'm in the middle of a refi / recap myself on my own operation.