Precision Machine Shop, Mississippi Defense Contractor with Real Estate

$2.7M

Revenue

$800K

SDE

5.6x

Multiple

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Full Editorial Writeup

This is a Mississippi-based machine shop serving national defense contractors under multi-year contracts. The business does precision machining work, and its customer base of defense primes and their supply chains gives it a stickier revenue profile than a typical job shop that lives quote-to-quote. Defense demand is program-driven and largely insulated from consumer cycles, which is exactly what you want in a manufacturing acquisition.

The company runs at $2.7m in revenue with $800k in cash flow, a healthy roughly 30 percent margin for a shop of this size. Management expects revenue to reach $3.0m in fiscal 2026, so the trend is up. Included in the $4.75m asking price is a 3-acre, 230,000-square-foot production facility valued at $1.5m, meaning you are buying both the operating business and the dirt it sits on.

Strip out the real estate and you are paying about $3.25m for roughly $800k of cash flow, or about a 4x operating multiple, with a hard asset backstopping a chunk of the purchase price. For a defense-anchored shop with multi-year contracts and expansion underway, that structure gives a buyer both cash yield and downside protection through the building.

Why we like it

Earnings quality is strong for the category: $800k of cash flow on $2.7m of revenue is a roughly 30 percent margin, well above the thin margins typical of commodity job shops. Multi-year contracts with defense primes mean this cash flow is contracted rather than quoted fresh every month, which raises the durability of those earnings.
The moat is the defense supply chain. Once you are qualified, audited, and on a multi-year program with national defense contractors, switching costs and requalification hurdles keep competitors out and keep you in. That is a very different risk profile from a shop dependent on one-off commercial orders.
Market tailwinds favor domestic defense manufacturing. Reshoring, sustained defense budgets, and program continuity all push volume toward qualified US shops like this one. Management already projects revenue rising from $2.7m to $3.0m in fiscal 2026, so the growth is visible not hypothetical.
The real estate lowers real risk. A 3-acre, 230,000-square-foot facility valued at $1.5m is included in the price, so a meaningful slice of your capital is backed by a hard asset you own outright. That protects the downside and gives you optionality to expand production or lease excess square footage.

How to improve it

Audit capacity utilization inside the 230,000-square-foot building. A facility that large against $2.7m of revenue almost certainly has unused square footage that could house additional machines or a second shift. Fill it with revenue-generating work or lease dead space to a compatible tenant.
Diversify the customer base beyond the current defense primes within the first year. Concentration among a few national contractors is the biggest single-point risk here. Use the defense qualifications you already hold to win adjacent programs and add aerospace or industrial OEM accounts.
Build a formal quoting and estimating discipline if it does not already exist. Machine shops leak margin on mispriced jobs and unbilled changes. Standardized estimating tied to real machine-hour costs can lift the 30 percent margin without adding a single new customer.
Invest selectively in newer CNC capacity to support the projected ramp to $3.0m and beyond. If growth is capacity-constrained, targeted equipment purchases pay back quickly against defense-grade pricing. Fund these out of the existing cash flow rather than the acquisition loan where possible.
Pursue additional certifications such as AS9100 or expanded ITAR/CMMC compliance if not already in place. These credentials open higher-value defense and aerospace contracts that lower-qualified shops cannot bid. Each certification widens the moat and the addressable pipeline.
Institutionalize the shop-floor knowledge before the seller exits. Job shops often run on the founder's relationships and tribal process knowledge. Document setups, tooling, and customer preferences so the business does not degrade after transition.

Diligence notes

Get the actual contracts and quantify customer concentration. Ask what percentage of revenue and cash flow comes from the top one to three defense contractors and what the remaining term is on each multi-year agreement. Concentration plus contract expiration timing is the core risk in this deal.
Verify the $1.5m real estate valuation with an independent appraisal and confirm it is genuinely included in the $4.75m price with clean title. Netting the building out implies roughly a 4x multiple on $800k of operating cash flow, so the valuation directly changes what you are really paying.
Scrutinize the cash flow definition and add-backs. Confirm whether the $800k is true owner earnings after a market-rate manager salary, and how much maintenance capex the machine base actually requires. Aging CNC equipment can quietly consume the reported cash flow.
Confirm the defense qualifications, certifications, and compliance status transfer to a new owner. ITAR registration, security clearances, and program approvals do not always survive a change of control automatically. If they lapse on sale, the moat and the contracts can evaporate.
Pressure-test the fiscal 2026 revenue projection to $3.0m. Ask for the specific backlog, purchase orders, and program awards that underpin the number rather than accepting a growth narrative. Verified backlog is worth far more than a broker's forecast.

Source

Originally listed on Synergy Business Brokers. View original listing →