Engine Machine Shop, 39-Year Oklahoma City Engine Remanufacturer with Real Estate

$1.5M

Revenue

$512K

SDE

4.5x

Multiple

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Full Editorial Writeup

This is a 39-year-old machine shop in Oklahoma City that rebuilds and remanufactures engines and their major components. Core work includes remanufacturing heads, rods, camshafts, and blocks, plus flywheel grinding and resurfacing and Magnaflux crack detection. The customer base is diversified across farmers, oil and gas operators, the trucking industry, construction equipment owners, and automotive and racing teams, which spreads exposure across several cyclical but non-discretionary end markets.

The economics here are attractive for a small shop: on $1.45m in revenue the business throws off $511k in owner cash flow, roughly a 35% SDE margin, which is strong for a labor-and-equipment services operation. About 60% of revenue is collected at time of service and the remaining 40% comes from vetted named accounts on net-30, so working capital and collections risk are modest. The moat is reputation, tribal knowledge, and hard-to-replicate skills like diagnosing failures, sourcing scarce parts, and judging remaining life in a component.

What makes this notable is that engine remanufacturing is a repair-and-reuse business that gets MORE relevant when money is tight. When operators cannot justify buying new equipment, they rebuild what they own. The $813k of real estate and $658k of FF&E included in the $2.31m ask mean a meaningful chunk of the price is backed by hard assets, which changes the risk profile versus a pure goodwill purchase.

Why we like it

Earnings quality is genuinely good for the segment: $511k of SDE on $1.45m of revenue is a 35% margin, and 60% of sales are collected at point of service which keeps cash conversion clean. The remaining 40% sits with vetted net-30 accounts rather than random exposure, so bad-debt risk should be low.
The moat is skill and reputation built over 39 years, not marketing spend. The ability to diagnose failures, source hard-to-find parts, and judge remaining component life is not something a new competitor stands up quickly, and clients keep coming back on reputation alone.
Engine remanufacturing is countercyclical in spirit. When farmers, truckers, and oilfield operators cannot justify buying new equipment, they rebuild, which means demand for this service tends to hold or rise precisely when the broader economy softens.
A large share of the price is asset-backed. The $2.31m ask includes $813k of real estate and $658k of FF&E, so you are buying roughly $1.47m of hard assets plus a cash-flowing business, which meaningfully limits downside versus a goodwill-heavy deal.

How to improve it

Convert the 40% named-account base into standing supply or preferred-vendor arrangements. The business runs with zero written contracts today, so formalizing even loose annual agreements with the trucking and oilfield accounts would smooth revenue and add real enterprise value at exit.
Add capacity and throughput analysis on the shop floor. With only six full-time employees and $658k of equipment, understanding which machines are bottlenecks and whether a second shift or added station could raise volume is the fastest lever to grow SDE without new customer acquisition.
Build a basic digital presence and lead engine. A 39-year-old shop that runs entirely on word of mouth almost certainly has no modern web funnel; a simple site, Google Business optimization, and targeted outreach to fleet and ag buyers could open a new demand channel cheaply.
Institutionalize the founder's tribal knowledge before he leaves. The diagnostic and parts-sourcing expertise is the moat and also the key-man risk, so documenting procedures and cross-training the crew during the transition period protects the asset you are paying for.
Expand into adjacent remanufacturing services the customer base already needs. Existing clients across ag, oilfield, and trucking likely need related component work, and layering on services with the same equipment and skills raises revenue per customer at high incremental margin.
Tighten pricing on the point-of-service 60%. A four-decade shop competing on reputation rather than price almost certainly has room for measured rate increases, and even a few points of price flows almost entirely to the bottom line.

Diligence notes

Quantify customer concentration inside the 40% named-account base. If a couple of trucking or oilfield accounts drive an outsized share of invoiced revenue, that changes the risk profile and should pressure the multiple.
Scrutinize the real estate valuation and how it is reflected in the multiple. The $813k of real estate is a large portion of the $2.31m ask, so confirm an independent appraisal and separate the operating-business multiple from the property to know what you are truly paying for the cash flow.
Assess key-man dependence on the retiring owner. The diagnostic skill, parts-sourcing relationships, and customer trust may reside largely with him, so understand what walks out the door and negotiate a longer, defined transition than the vague 'to be determined' currently offered.
Verify the SDE with tax returns and normalize add-backs. Confirm the $511k cash flow reconciles to filings, that owner compensation and any personal expenses are properly identified, and understand the gap between the $511k SDE and $421k EBITDA.
Evaluate oil and gas exposure specifically. Oilfield-linked demand is more cyclical than ag or general trucking, so pull revenue by end market over the last few years to see how the shop performed through the 2015-2016 and 2020 downturns.
Inspect the condition and remaining life of the $658k in equipment. Machine shop equipment can be old and hard to replace, so assess deferred maintenance and near-term capex needs that could eat into the reported cash flow.

Source

Originally listed on BizBuySell. View original listing →