Manufacturing company due diligence checklist: customers, plant and records

What belongs on a manufacturing company due diligence checklist?

A manufacturing checklist covers customers and program concentration, equipment and facilities, quality systems, supply chain, ERP and cost data, and people. The addition for advisors who also think about data licensing is a seventh section that separates what the customer owns from what the manufacturer created itself.

That split matters because a plant lives on other people's information. Customer drawings, specifications and tooling data sit next to the manufacturer's own quotes, routings, quality records and scheduling decisions. Only the second group is the manufacturer's to license.

Customers, programs and contracts

Rank customers by gross margin contribution, then by program life. A plant that makes one part family for one OEM is a different risk from a job shop with a hundred small accounts.

• Sales by customer and by part family for several years, with margin after material and direct labor
• Supply agreements, purchase order terms, long-term agreements and price-adjustment clauses
• Program awards, expected end-of-life dates and pending requotes
• Tooling ownership: which dies, molds and fixtures belong to the customer and which to the plant
• Change-of-control and assignment language in customer agreements
• Warranty, returns and chargeback history by customer
• Open requests for quote and win-loss history

Concentration analysis lives in its own guide, customer concentration in M&A.

Equipment, facilities and capacity

A site visit is where equipment claims get checked. The M&A site visit preparation checklist covers what a seller should have ready on the floor.

Quality systems, certifications and compliance

• Quality manual, procedures and the most recent third-party audit results
• Certifications held and their expiry dates, such as ISO 9001 or industry variants
• Customer scorecards, corrective action requests and the closure record
• Scrap, rework and first-pass yield trend by line
• Safety program, incident logs and open citations
• Environmental permits and any open notices
• Export-control and customer security flow-downs where the plant makes controlled parts

This is general information, not legal, tax or financial advice. Which certifications and permits apply depends on the products and customers, so deal counsel and the buyer's operating team confirm the list.

ERP, costing and supply chain

The ERP is the plant's memory. Buyers use it to test whether standard costs match reality.

• ERP vendor, version, customizations and the date of the last major upgrade
• Bills of material, routings and standard versus actual cost variances
• Inventory valuation method, reserve policy and cycle count accuracy
• Supplier list with spend by supplier and single-source parts
• Purchase price variance trend and open commitments
• Work-in-process aging and obsolete inventory review

The same ERP is the most useful system when licensing is on the table, because it links quotes, orders, production and shipments in one structure.

Which records are the manufacturer's own, and which belong to customers?

Use a three-bucket sort before anyone talks about licensing.

Manufacturers with outcomes attached to those records are the interesting ones: a quote that was won or lost, a nonconformance that was closed with a root cause, a schedule change that was approved. Those are multi-step decisions with results.

How to run the extra records pass

1. Ask the operations or IT lead to list the systems in use (ERP, MES, quality system, CRM, email, shared drives) and the years each covers.
2. Ask who can export from each one, and whether any legacy system was retired without an export.
3. Have the controller or general counsel flag customer agreements that restrict use of non-public information.
4. Check headcount against the who qualifies baseline: 50+ full-time employees at peak (contractors excluded), several years of documented operations, rights to license, and an authorized sponsor.
5. Run the company fit checker for a preliminary, non-binding screen.

Headcount is the first test, and rights over the drawings are often the limiting factor after it.

Red flags

• Most engineering content is customer-owned and the customers have not agreed
• The plant is a captive operation inside a larger group whose records are controlled elsewhere
• Government or customer security rules restrict handling of the data
• The ERP was replaced and the old one wiped
• The owner will not consider an exclusive license for an agreed term

Staffing-led businesses have a different shape, which the staffing agency due diligence checklist covers. For the buyer-side view, see how to build an M&A buyer list and, if you plan to circulate this list in a professional group, how to share a company referral checklist in a professional community.

How partner rewards work for an advisor

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company. The reward is paid only after the buyer pays and SourceX receives its fee; an introduction, meeting or signed agreement alone does not trigger payment, and no reward is guaranteed. The reward is a share of SourceX's fee, never deducted from what the company receives. Licensed advisors should check their own rules on referral fees and client disclosure; see the program terms and referral opportunities for M&A advisors.

Next step

Add the three-bucket sort to your next manufacturing mandate. If the plant clears it, register as a partner and make the introduction, or have the owner apply at sourcex.si/apply with your referral link.