Tool and die shop due diligence

A tool and die shop’s diligence file needs to go beyond the standard financial and corporate review, because the asset most likely to disappear after closing — a small bench of skilled toolmakers — is not something a balance sheet captures. A buyer working through this checklist is really confirming three things at once: that the people will stay, that the customers will keep buying, and that the equipment can keep producing in-spec work without an immediate capital call.

Toolmaker agreements, reviewed individually

Request every toolmaker’s employment agreement and review it for non-solicitation terms and any indication of planned departure, rather than accepting a summary from the seller. A shop where the senior toolmakers have no retention terms in place and no documented intention to stay carries meaningfully more talent-flight risk than one where those questions have already been addressed, and that difference belongs in the offer.

OEM customer contracts and supplier-qualification status

Review the shop’s largest customer contracts for any change-of-control or re-qualification provision, and, where the shop supplies customers under IATF 16949-linked or similar supplier-qualification programs, confirm directly what a change of ownership triggers under those programs rather than assuming the relationship continues unaffected. A contract that survives the sale on paper but requires a re-audit that pauses active work is a materially different asset than one that transitions without interruption.

Excluded assets and warranty exposure

Confirm explicitly which design files and CAD data are the shop’s own intellectual property versus customer-owned assets excluded from the sale, since customer-specific tool designs typically remain the customer’s property regardless of who built them. Separately, ask directly about any tooling already in the field that has failed or generated a warranty claim, since undisclosed exposure here is one of the more common sources of post-closing disputes in this sub-sector.

Registered security interests against the equipment

Because EDM, grinding and CMM equipment is capital-intensive and frequently financed or leased rather than purchased outright, run a search for registered security interests against the shop’s equipment before relying on the seller’s representation that everything is owned free and clear. A machine still subject to a lender’s or lessor’s registered interest is not fully the seller’s to sell, and an undischarged registration can complicate or delay closing if it surfaces late in the process rather than early. This is a standard step in any equipment-heavy acquisition, but it carries particular weight here because the equipment list — not real estate or inventory — is usually the largest hard asset on a tool and die shop’s balance sheet, and a buyer’s financing package is often structured around that same equipment as collateral.

Calibration and inspection records, not just maintenance logs

Maintenance logs tell you whether a machine has been kept running; calibration and inspection records tell you whether its output can still be trusted, and the two are not the same thing. Ask for CMM calibration certificates and inspection records specifically, not just service history, since a coordinate measuring machine that has drifted out of calibration can pass parts that are actually out of spec without anyone noticing until an OEM customer’s own incoming inspection catches it. Gaps in calibration history are a real technical and compliance risk in a shop supplying customers under a formal supplier-qualification program, because a customer that discovers uncalibrated inspection equipment during its own audit may put the relationship, not just the machine, in question. This is a narrower and more technical check than a general equipment condition review, and it belongs in the file alongside it, not instead of it.

Findings that commonly stop a deal

• The shop’s most senior toolmaker confirms they will not stay past closing, with no realistic replacement identified
• An OEM customer confirms that ownership change will trigger a supplier re-audit that could pause active work
• Reference calls with customers surface a pattern of late or over-budget tool builds not previously disclosed
• Undisclosed warranty exposure surfaces on tooling that has already failed in the field
• A registered security interest against key equipment that the seller did not disclose

The equipment and safety layer underneath

Request maintenance logs and remaining-life estimates for EDM, grinding and CMM equipment, and confirm the seller’s Workplace Safety and Insurance Board clearance certificate is current — an unresolved WSIB balance can attach to a buyer in an asset purchase in ways worth confirming before closing rather than after. Because WHMIS applies to EDM dielectric fluids, coolants and cleaning solvents used in the shop, it is also worth confirming safety data sheets and handling procedures are current, particularly if the shop’s customers include any that expect their suppliers to hold their own formal safety certifications.

Workplace-safety inspection history alongside the WSIB certificate

Beyond the WSIB clearance certificate itself, ask whether the shop has had any Ontario Ministry of Labour, Immigration, Training and Skills Development orders, inspections or incidents tied to its press, EDM or grinding equipment — other provinces run separate occupational health and safety frameworks that would carry the equivalent record. An open or unresolved workplace-safety order is a liability a buyer inherits along with the machinery, and it is a quick, specific question to ask directly rather than assume away because the equipment is currently running without incident.