Selling a CNC machine shop or precision machining company

Each certificate names the certified organization and its sites, and the certification contract requires the company to tell its certification body about a change in ownership. The certification body then decides what the change needs, which can include a special audit or a reissued certificate. For AS9100, it also updates the listing in the aerospace industry's OASIS database.

In a stock sale the certified company continues, so the certificate normally carries on once the change is reviewed. In an asset sale a new legal entity runs the business, and the certification body decides whether to reissue the certificate or treat the buyer as a new client.

Aerospace customers require a new full or partial first article inspection after events that can affect fit, form or function: a change in manufacturing source, process, location, tooling or materials, a change to the NC program, or a lapse in production, often of two years. A change of ownership on its own is not usually on that list.

A stock sale that keeps the same site, machines and programs normally needs only the notices customers' terms require. A sale that moves work, adds machines or re-posts programs can trigger new first articles, so integration plans are best scheduled with customers.

A US company that manufactures defense articles must register with the State Department's Directorate of Defense Trade Controls even if it never exports, so a shop machining parts on the U.S. Munitions List needs registration. Whether a part qualifies depends on its classification, which customers' drawings usually indicate.

The registrant must notify DDTC within five days of a change in ownership or control, and at least 60 days before any sale to a foreign person. After an acquisition, the parties tell DDTC which registration and licenses continue. In an asset sale the buying entity must hold its own registration before it manufactures.

Showing ITAR-controlled drawings, travelers or CNC programs to a foreign person, even inside the United States and even by letting them look, is an export that needs State Department authorization. Technical data controlled under the Export Administration Regulations works the same way, although whether a license is needed depends on the item and the person's country.

Sellers commonly keep controlled files in a separate data room folder open only to screened U.S. persons, limit plant tours the same way, and seek authorization before any foreign member of a buyer's team sees them. The rule applies before closing, whatever the deal structure.

CMMC status attaches to the information systems that were assessed, not to the company's owners, and it is recorded in the Defense Department's Supplier Performance Risk System by CAGE code. Depending on the contract, Level 2 is assessed by the company itself or by a certified third-party assessor every three years, with an affirmation each year.

In a stock sale the same systems and status continue as long as the assessed boundary does not change significantly. Moving the company onto a buyer's systems, or merging networks, changes the scope and generally requires a new assessment. A new entity in an asset sale needs its own CAGE code, and its status should be confirmed early.

A machine shop that makes only components for finished-device manufacturers is exempt from FDA establishment registration, and FDA's quality system regulation does not apply to component makers. Medical customers instead flow their quality requirements down by contract, which is why many such shops hold ISO 13485.

Registration is required for shops that make finished devices for another company, or components packaged and labeled for sale to end users. A registered establishment must update its owner or operator information within 30 days of a change, so an asset sale means updating the registration.

It depends on the contract. Customers own their drawings and data, and fixtures, gauges or tooling a customer or the government paid for are normally the customer's property, held in the shop's custody. Programs the shop's own employees write generally belong to the shop unless the contract assigns them to the customer.

In a stock sale ownership does not change. In an asset sale the seller can convey only what it owns, so the purchase agreement should assign the programs expressly, and customer-owned tooling needs the customer's consent. Programs for ITAR parts can themselves be controlled technical data.

A lender's recorded lien on a machine stays attached when the machine is sold unless the lender releases it. In an asset sale, financed machines are paid off at closing with lien releases, or the lender consents to the buyer assuming the loan, and leased machines generally need the lessor's consent to assign.

In a stock sale the borrower stays the same, but loan and lease documents often treat a change of control as a default or require consent. A foreign buyer that plans to move advanced machines abroad may also need an export license for them.

Machine shops usually manage spent cutting oils and coolants as used oil, which is handled under its own federal rules rather than as hazardous waste while it is recycled. It becomes hazardous waste if it is mixed with chlorinated degreasers or other listed solvents, or disposed of rather than recycled, so buyers look at how fluids and solvents have been handled.

New Jersey is the leading example of a state where the sale itself triggers environmental duties. Its Industrial Site Recovery Act covers machine shops that handle hazardous substances, so a sale of the business, its real estate or a controlling interest requires notice within five days of signing and a remediation path before closing.