Machining & Fabrication Shop, 36-Year Mississippi Defense Contractor

$2.7M

Revenue

$800K

SDE

5.9x

Multiple

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Full Editorial Writeup

This is a 36-year-old machining, welding, fabrication, cutting, and forming shop based in Mississippi that has built a client base including national defense contractors on multi-year contracts. Founded in 1990, the business does roughly $2.7m in revenue with $800k in owner cash flow, a healthy 30 percent margin for a metal-fabrication operation. Management projects revenue reaching $3m in fiscal 2026, so the business is being sold on a rising line rather than a declining one.

The asking price of $4.75m includes a 3-acre production facility of 230,000 square feet valued at $1.5m. Backing the real estate out, the operating business is being priced around $3.25m, or roughly 4x cash flow, which is a fair-to-slightly-full multiple for a defense-adjacent machine shop with contract backlog. The defense-contractor customer base and multi-year agreements are the real prize here: revenue that recurs by contract in a sector that does not shut off in a downturn.

The seller is retiring with no family successor, which is the classic setup for an operator buyer or a strategic consolidator. The combination of long tenure, blue-chip end customers, owned real estate, and a growth trajectory makes this a durable, cash-generative acquisition, provided the customer concentration and owner-dependence check out in diligence.

Why we like it

Earnings quality is solid: $800k of cash flow on $2.7m of revenue is a 30 percent margin, strong for metal fabrication where 12 to 18 percent is more typical. That margin plus multi-year defense contracts suggests pricing power and a real backlog rather than spot work bid job by job.
The moat is the customer roster and the switching costs around it. National defense contractors do not re-source qualified machining and welding vendors casually, since supplier approval, quality certifications, and program history take years to build, which protects revenue from churn.
Market tailwinds favor domestic defense manufacturing right now, with reshoring and elevated defense budgets pushing more work to qualified US shops. Revenue is already guided to grow from $2.7m to $3m in fiscal 2026, so the buyer inherits momentum, not a turnaround.
The real estate and physical footprint create optionality. A 3-acre, 230,000 square foot facility valued at $1.5m is included, meaning the buyer controls the site, can finance against it, and is not exposed to landlord risk or forced relocation of heavy equipment.

How to improve it

Map customer concentration in the first 30 days and diversify it. If a single defense prime drives most revenue, prioritize adding two or three additional programs or commercial fabrication accounts to reduce the risk that one lost contract sinks the year.
Formalize the estimating and quoting function so the shop can bid more work without the owner. A retiring owner often holds the pricing knowledge, so documenting standard rates and margins lets you scale quote volume and win more of the growing defense pipeline.
Pursue additional quality certifications such as AS9100 or expanded NADCAP scope if not already held. These credentials open the door to more defense and aerospace primes and command premium pricing on qualified work.
Add a second shift or invest in capacity if the facility is running below its footprint. A 230,000 square foot building at $2.7m of revenue suggests room to grow output significantly against fixed overhead already covered.
Build a repeatable business development motion targeting adjacent primes and Tier 1 defense suppliers. The current growth appears customer-led rather than sales-led, so a dedicated outreach effort could accelerate the projected $3m toward materially higher numbers.
Institute preventive maintenance and CNC upgrade planning to protect throughput. Machine downtime directly caps revenue in a shop like this, so a capital plan for aging equipment protects the earnings you are paying for.

Diligence notes

Verify the multi-year defense contracts in writing: term length, renewal terms, pricing escalators, and whether they survive a change of ownership. Government-adjacent contracts often include novation or assignment clauses that must be cleared before close.
Quantify customer concentration precisely. If national defense contractors are a small number of accounts, understand what percentage of the $2.7m each represents and how long each relationship has run.
Confirm the fiscal 2026 revenue projection of $3m with backlog, purchase orders, and signed contracts rather than optimism. Ask for the current order book and how much of next year is already booked versus assumed.
Assess owner dependence and workforce stability. Determine which certifications, security clearances, or customer relationships rest with the retiring owner, and evaluate whether the skilled machinists and welders will stay through transition.
Get an independent appraisal of the real estate and the equipment. Validate the $1.5m facility value and inspect the condition and remaining life of CNC machines, welders, and forming equipment, since deferred capex would eat into the return.

Source

Originally listed on BizBuySell. View original listing →