What do you get when you buy a metal service centre?

A metal service centre buys metal from mills and other suppliers, stores it, cuts or processes it, and delivers it to customers. That is different from a fabrication shop, which makes finished products. When you buy one, the sale agreement is a list of very different things: material on racks, machines, a yard, vehicles and relationships. Go through them one at a time and ask how each one actually transfers.

Inventory that moves with the metal market

Stock is often the largest single item. Its value moves with the metal market, and some of it may be slow, damaged, rusted or cut to a customer’s order. Ask how the inventory is counted, who counts it and when, how slow stock is treated, and whether any of it belongs to customers or sits on consignment. Your accountant can explain how stock is carried in the books.

Saws, shears and processing lines

Ask for a list of each machine with its age, maintenance records and any lender with a claim on it. Leased equipment may need the lessor’s consent to move, so check the lease. An independent equipment inspection is worth arranging for the main lines, because a failed saw or burner can stop deliveries. Also ask about cranes, forklifts and the yard they run in.

Accounts, premises and trucks

Supplier accounts and credit terms are usually the owner’s, and a supplier may decide whether to continue them with you. Customer accounts are similar: the business has them, but the customers choose to stay. Check the lease, the vehicles’ ownership and the staff who hold the technical knowledge. For the supplier side, see how to check supplier relationships.