Due diligence on an aerospace parts manufacturer

Once an aerospace parts manufacturer is under a letter of intent, diligence is where a buyer finds out whether the business behind the listing matches the one described in it. Beyond the standard review of financial statements and contracts, this sub-sector has three verification points that carry more weight than usual: whether certification and compliance status hold up under direct verification, whether program agreements actually transfer the way the seller describes, and whether the traceability and configuration-control systems function in practice, not just on paper. Each has a specific way to check it, and each has a specific finding that should change how a buyer proceeds.

Verify AS9100 status at the source, not from a summary

Request the full certificate history, the most recent surveillance or transition audit report, and any open corrective actions — a shop that shows only the certificate without the underlying audit history has shown a buyer half the picture. Where possible, speak directly with the certification body handling the account rather than relying solely on documents the seller has selected and provided.

Confirm Controlled Goods Program and export-control status directly

This is not information available through a public searchable registry, so it has to be confirmed directly against the company’s own registration records and, for defence-adjacent programs, corroborated through the relevant OEM or the federal administrator. A gap here is a serious legal and personal-liability issue for the registered individuals, not a paperwork item to note and move past.

Verify who actually controls the entity being purchased

Because Controlled Goods Program registration and security clearance attach to specific individuals, confirming beneficial ownership and control accurately matters more here than in a typical small-business purchase. A federal corporation’s register of individuals with significant control, and how to search it, is the starting point for confirming that the people the buyer believes control the target are in fact the people who do.

Test traceability and configuration control against real shipped lots

Reviewing the documented procedure is not the same as testing it. Pull a sample of shipped parts and trace them through the actual material heat and lot records and process records that produced them — gaps found this way are far more telling than a procedure manual that reads cleanly on its own.

Search for judgments, executions and CRA debts against the entity

An execution or judgment search against the corporate entity, and a check of its standing and outstanding CRA debts, is basic diligence for any business purchase, but it matters more here because a judgment or a tax lien can complicate the very ownership and control confirmation that Controlled Goods Program registration depends on. Search the applicable court and personal property registries for registered judgments against the entity, confirm the corporation is in good standing with its governing jurisdiction, and request a tax clearance certificate or written confirmation of outstanding balances directly from the Canada Revenue Agency rather than relying on the seller’s representation alone. A search under Ontario’s Personal Property Security Act — or the equivalent personal-property-security regime in the relevant province — against the same equipment being valued also confirms whether it is already pledged as collateral to another lender, which changes what a new lender can actually secure against it. A clean result here does not tell a buyer much on its own, but an unexpected judgment or a significant CRA balance is the kind of finding that can stall closing until it is resolved.

Verify long-lead material inventory against actual stock, not the ledger

Aerospace shops typically carry meaningful inventory in long-lead-time raw material — specialty alloys, forgings, and material already consumed against a specific program’s work order — and a buyer should physically verify a sample of that inventory against the ledger rather than accept the balance-sheet figure. Material tied to a cancelled or de-prioritized program can sit on the books at full value long after its real usefulness has declined, and work-in-process tied to a program nearing the end of its production run carries the same risk. Reconciling a sample of physical stock against both the general ledger and the specific programs it is allocated to is one of the more reliable ways to catch this before it becomes the buyer’s problem after closing.

Check environmental exposure from special-process chemistry

Heat treating and plating both involve regulated chemical processes, and the environmental exposure they create does not disappear with a change of ownership. In Ontario, confirm Environmental Compliance Approval status and review any record of site condition; other provinces run their own environmental permitting regimes, so confirm the equivalent locally rather than assuming Ontario’s framework applies elsewhere.

Know what a finding actually means before reacting to it

An OEM confirming that a full re-audit will follow a change of ownership is a timeline and closing-condition problem to be managed through the purchase agreement, not automatically a reason to walk away. A certification found genuinely at risk of lapsing is more serious, since a lapse can halt production outright. A single-program revenue concentration on a program whose production rate is already declining is primarily a pricing problem rather than a legal one — sorting findings by what they actually threaten, rather than treating every red flag identically, is what makes diligence useful instead of merely thorough.