Midwest Aerospace & Defense Precision Machining

$5.7M

Revenue

$1.1M

SDE

5.3x

Multiple

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Full Editorial Writeup

This is a Macomb County, Michigan precision machining and custom tooling operation serving aerospace, military, defense, and naval end markets, plus select advanced industrial clients. The shop runs across multiple climate-controlled facilities with a deep inventory of specialized machinery and holds quality certifications required to compete in regulated industries. Capabilities span specialty machining, custom tool fabrication, mold base construction, waterjet cutting, gun drilling, grinding, and assembly, with work that is predominantly custom and project-driven rather than tied to a narrow band of repeating contracts.

The business does $5.735M in revenue with $1.115M in SDE, a healthy 19.4 percent owner earnings margin for a shop of this size. It served over 80 customers in a recent year with no single account dominating revenue, which is exactly the kind of diversification that de-risks a defense supply chain platform. Management is already in place, including a general manager, project managers, engineering staff, and 36 total employees, while the retiring owners operate remotely in a limited oversight role.

What makes this notable is the deliberate pivot the company made away from lower-margin legacy work toward higher-value aerospace and defense machining, which lifted both top line and profitability. The team is long-tenured and technically capable, the certifications create switching friction, and the defense/aerospace tailwind gives a buyer a scalable platform rather than a one-person job shop.

Why we like it

Earnings quality is strong for a job shop, with $1.115M SDE on $5.735M revenue, a 19.4 percent margin driven by the shift into high-tolerance aerospace and defense work. The customer base of 80-plus accounts with no single dominant customer means the earnings are not hostage to one contract renewal, which is rare and valuable in custom manufacturing.
The moat is real and underappreciated. Quality certifications for regulated aerospace, military, and naval work create qualification barriers that keep competitors out and make you a sticky, pre-vetted supplier once you are in. Combined with a long-tenured technical workforce and specialized machinery, a new customer cannot simply swap you out cheaply.
Defense and aerospace spending is a durable, non-discretionary tailwind that holds up through recessions and geopolitical cycles. Naval and military applications in particular ride multi-year procurement budgets rather than consumer sentiment, so demand for high-tolerance parts does not evaporate when the economy turns.
This is a platform, not a personality. Day-to-day operations already run through a general manager, project managers, and engineers, with the retiring owners sitting remote in a limited oversight role. A strategic buyer or PE group can absorb this without needing to be a machinist, and cross-selling into an existing defense network is immediate upside.

How to improve it

Build a dedicated sales function focused on named defense and aerospace primes and tier-one suppliers. Right now new business arrives through referrals and organic discovery, meaning there is no systematic outbound engine. Hiring one experienced defense BD rep to work existing certifications into new programs could meaningfully raise the backlog within a year.
Pursue additional compliance credentials such as AS9100, ITAR registration if not already held, and NADCAP accreditation for specialty processes. Each new certification unlocks a wider set of qualified opportunities and higher-margin work, and the cost is modest relative to the revenue it can gate access to.
Attack revenue lumpiness by converting more custom project work into blanket purchase orders and multi-year supply agreements. Project-based revenue fluctuates year to year, so locking in repeat volume with your best 10 to 15 accounts smooths cash flow and makes the business worth a higher multiple at resale.
Invest in additional CNC and specialty equipment to expand throughput during peak demand and reduce reliance on multi-shift scheduling as the only capacity lever. Targeted capex on machines with clear payback under 24 months adds capacity and lets you bid larger contracts you currently have to pass on.
Formalize a workforce retention and apprenticeship pipeline given the reliance on a long-tenured, hard-to-replace technical team. Skilled machinist attrition is the single biggest operational risk in this business, so lock in key staff with retention agreements at close and start training the next cohort immediately.
Implement shop-floor data and job-costing systems to identify which jobs and customers actually earn the margin. Custom job shops routinely subsidize unprofitable work without knowing it, and better costing lets you reprice or fire the bottom decile of jobs to lift blended margin.

Diligence notes

Verify the SDE bridge and normalize owner add-backs, since the owners run remotely with limited involvement. Confirm whether the $1.115M SDE already reflects the cost of the general manager and full management team, because if the owners are truly hands-off, reported SDE and true EBITDA may be closer than typical and the 5.31x multiple should be judged on that basis.
Scrutinize revenue concentration and durability behind the 80-plus customer claim. Pull a multi-year customer revenue table to confirm no account is 15 percent or more, and examine whether the diversification masks a few large lumpy projects that inflated a single recent year.
Confirm the exact quality certifications held and their transferability, since these are the core moat. Check expiration dates, audit history, and whether ITAR or defense contract eligibility survives a change of ownership, because a lapse or non-transfer could gut the qualified customer base overnight.
Assess the true value and condition of the specialized machinery, since this is an equipment-heavy sale. Get an independent appraisal of the machine inventory, review maintenance logs and remaining useful life, and quantify near-term replacement capex that a buyer will actually have to fund.
Review the facility leases carefully given the business operates from multiple leased, climate-controlled sites. Confirm lease terms, renewal options, rent escalation, and any landlord relationship to the sellers, because a below-market related-party lease could inflate current profitability.
Stress-test the aerospace and defense pivot narrative against actual program timelines. Understand which contracts are firm versus expected, backlog visibility, and how revenue would behave in a defense budget slowdown, so you are not paying for a peak-cycle earnings snapshot.

Source

Originally listed on BizBuySell. View original listing →