Aerospace MRO M&A – Fixin’ to Be a Busy Year
With all the attention in the commercial aerospace industry focused on Boeing’s ongoing saga with the 787 Dreamliner, a compelling trend has emerged in the slipstream in merger and acquisition (“M&A”) activity in the sector. Transactions involving maintenance, repair, and overhaul (“MRO”) providers have represented a significant amount of deal volume in an overall robust aerospace M&A environment, particularly in the last few months. From November 2012 through January 2013, acquirers announced 12 aerospace MRO / logistics support transactions – roughly a third of all aerospace industry M&A activity over that period.
The table below summarizes some select MRO transactions that have occurred over the past several months. While these transactions have been unified under the “MRO” umbrella, the target companies themselves represent a wide range of expertise, from composites / aerostructures to avionics to general field support services.
There are three noteworthy developments in the types of transactions that have been occurring in the MRO space.
First, traditionally defense-oriented companies have entered into the mix to pursue more non-defense MRO plays. For example, Lockheed Martin acquired the Montreal, Quebec based engine MRO business out of bankrupt Aveos, a portfolio company of KKR.
A second trend, which has really been a continuation of a theme for the past few years, is that private equity firms have been extremely active in acquiring MRO / logistics support companies. Two recent examples include Goldner Hawn Johnson & Morrison’s acquisition of Universal Turbine Parts, a provider of aftermarket turboprop aircraft engine and engine parts, and PNC RiverArch Capital’s acquisition of Precision Aviation Group, a provider of supply chain and Inventory Supported MRO services (ISMRO®) for instruments, avionics, and accessories for a variety of fixed-wing and rotary-wing aircraft.
Third, the companies that have been most in demand are those with unique capabilities in areas with high barriers to entry. Engine components and avionics are two examples of such niches.
With strong air traffic activity and continued expansion in the aircraft fleet, fundamentals are healthy for the aerospace MRO sector. We expect these fundamentals to underpin continued M&A interest from a variety of industry players in 2013.