How to sell a manufacturing business or machine shop

Selling a machine shop or manufacturing business typically takes six to twelve months, with most of the time spent preparing financials and operations data and about four to six months between a signed letter of intent and closing. Diligence here is operational and technical: buyers examine your customer concentration, backlog, equipment condition, certifications, and gross margin by job, so organizing that information up front is what keeps a deal on track.

Buyer type sets the spread. An individual operator or self-funded searcher typically pays 3.0-6.0x SDE, often with SBA financing. A search fund generally pays around 3-5x EBITDA, while a private-equity roll-up pays roughly 5.0-9.0x EBITDA, usually structured as 60-80% cash at close with the balance in equity rollover, a seller note, or an earnout. A strategic acquirer — a larger manufacturer seeking capacity, capabilities, or a customer base — can reach the high end when your shop fills a clear gap in their supply chain.

In manufacturing, buyers underwrite durability of the order book. Customer diversification is the biggest swing factor: a shop where no single customer dominates is worth materially more than one dependent on one OEM. Long-term supply agreements or repeat-order relationships, certifications (ISO 9001, AS9100, ITAR registration where relevant), modern and well-maintained CNC equipment, skilled machinists who will stay, proprietary tooling or processes, and a solid backlog all push you toward the top of the 5.0-9.0x range. Owned real estate is often handled as a separate sale or lease.

Model your after-tax outcome before agreeing to structure. Most of your gain is taxed at long-term capital-gains rates of about 15-20% federal, plus the 3.8% net investment income tax for higher earners (generally not owed by those who materially participate) and state tax, and asset sales — including how you allocate equipment and goodwill — usually tax the seller less favorably than stock sales. DealSeam works the buyer-paid side of industrial M&A, matching owners with vetted PE platforms and strategics where there's a real fit, and sellers pay nothing. We never guarantee a buyer or price; we help you understand value and who is acquiring.