Mergers & Acquisitions: Business Aviation - Taking off into the Wind
December 17 , 2008
The business aviation sector of the aerospace industry has been hard hit by the current financial crisis, yanking recent M&A prices off their recent peaks per our pre-NBAA 2008 predictions. Nonetheless, we believe that these segments of the sector will remain especially attractive to potential acquirers over the next twelve to twenty four months:
- Business Services: Jet centers especially designed to support increased business jet travel. Limousine services, upscale catering, showers, conference rooms, etc, will make these businesses different from your grandfather's traditional fixed base operator (FBO). Indeed a considerable amount of deal activity is being driven by consolidation of the still-fragmented FBO segment of the industry.
- Aircraft Refurbishment & Avionics Upgrades: During these trying times, customers that cannot afford new aircraft will retrofit the aircraft they already have. Additionally avionics providers that have stand-alone solutions will shop for acquisitions that enable integrated avionics offerings, especially as tier-one suppliers continue to get consolidated.
- Maintenance, Repair and Overhaul (MRO): MRO firms that contribute to nose-to-tail “total care” or “cost per hour” programs and can contribute to faster turnaround and delivery times. Location too, is key. Also providers of superior engine repair capabilities compared to that offered by OEMs.
- Asset Management, Inventory Management and Supply Chain Solutions: No business jet OEM wants its supply partners to have the same supply chain problems that plagued Airbus A380 and Boeing 787 delivery schedules in recent years.
- Information Services: Some of the highest prices paid by acquirers have been for information-based products and services. On-line flight planning, weather, trip/route planning, etc.
- In-Flight Passenger Systems & Services (beyond just in-flight entertainment). An attractive niche for this otherwise traditionally notoriously cyclical segment of the aviation industry. Some OEMs and their tier-one suppliers might find these companies to be a source of competitive differentiation.
- Composite Structures & Component Manufacturers: Enables larger interiors, lower weight and less drag. At the time of our August newsletter, full service Jet A at Orlando Executive Airport was $6.79. While prices have since come down, business jet owners are still looking to economize wherever they can.
WHAT THIS MEANS FOR BUYERS & SELLERS
Despite the headwinds, aviators still take off into the wind. Buyers have unique opportunities to acquire those companies that are performing well in the aviation sector. Valuations in general may have fallen, but not the vitality of these companies. Buyers have either the opportunity to wait out the storm or to obtain good valuations now for well-run businesses.
Should you wish to discuss this article, or if we can assist in evaluating exit/liquidity strategies and help you identify the appropriate timing of a transaction, please contact PCE at 407.621.2100.
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