So You Want to Buy a Manufacturing Company? Don’t Forget to Check Under the (Factory) Hood

So You Want to Buy a Manufacturing Company? Don’t Forget to Check Under the (Factory) HoodPrivate equity investors love manufacturing. It’s tangible, essential, and, with the right playbook, a margin-expanding cash machine. But far too many deal teams focus on the commercial upside, ignore the factory floor, and wake up post-close realizing they bought a 1997 Buick disguised as a growth platform.

Let’s fix that.

Here’s why operational technology (OT) should be one of your first diligence calls—not an afterthought.

1. The Factory Floor is Where the Value Creation Actually HappensTop-line growth and market expansion are great, but without operational scale and reliability, they won’t translate to the EBITDA line.

If a factory can’t consistently produce what sales is selling—or struggles to scale capacity—you’ll be spending your first two years fixing problems instead of executing your value creation plan.

OT controls how fast, reliably, and cost-effectively a factory runs. Ignore it at your peril.

2. Old Equipment + Aging Controls = Hidden CapEx Time BombManufacturers are notorious for running equipment until it dies. Control systems (PLCs, HMIs, SCADA) often go untouched for decades.

The result? A plant that looks great on the balance sheet but is one obsolete part away from shutting down. We've seen plants where critical machines run on Windows XP, or rely on a single programmer named Dave who hasn’t documented his code since the Bush administration.

Your planned $5M growth CapEx may suddenly turn into a $15M emergency replacement project—right in the middle of your hold period.

3. Operational Tech is the Foundation for Modern Lean and Industry 4.0If your exit strategy includes “smart factory,” “predictive maintenance,” or “supply chain integration” buzzwords, you’ll need OT that can support it.

You can’t implement advanced analytics or AI if your machines aren’t even connected. A company without modern OT is stuck running its operations on spreadsheets, whiteboards, and walkie-talkies.

Buying that company is fine—just price the digital catch-up into your deal model.

4. Cyber Risk is No Longer Just an IT ProblemMost diligence processes cover IT cybersecurity, but miss the bigger risk: the factory floor. Ransomware hitting your MES or PLC network can shut down production for days, not hours.

Recent attacks on global manufacturers have cost hundreds of millions in lost production and ransom payments. If the company doesn’t know what OT assets it has—or how vulnerable they are—you’re inheriting a risk bigger than any supplier contract dispute.

5. Good OT Unlocks Faster Integrations and Add-OnsIf you're running a buy-and-build strategy, having common OT platforms makes post-acquisition integration smoother. Standard controls and systems mean faster visibility across sites, consistent KPIs, and one scalable manufacturing platform—not a Frankenstein’s monster of mismatched systems.

Bottom Line for PE Principals:Before you fall in love with the revenue line or the customer logos, ask yourself:

Can this factory actually deliver growth reliably?Do the machines and controls support the next stage of scale?Is there an OT foundation for the Industry 4.0 story I’ll be pitching at exit?The answers don’t require a PhD in engineering. Just the right diligence partner who knows where to look.