The healthy aerospace market in 2012 has proved an opportune time for many financial sponsors to realize successful investments. Cyclical commercial aerospace firms have bounced back from the downturn, and despite global macroeconomic concerns, are benefiting from positive industry dynamics such as traffic growth (29 straight months of growing passenger traffic and capacity) and record backlogs at OEMs (~7 years at Boeing and Airbus). Strong financial performance at commercial aerospace businesses has propelled stock price gains (up 10.4%(1) in 2012 through December 14th), and long-term confidence and accessible capital markets have helped fuel M&A.
Portfolio company exits in the aerospace industry have taken off since the market trough, with five in 2010, 16 in 2011, and 22 in 2012 through December 14th. Investors have been rewarded with solid returns, including the more than three times return on Vance Street Capital’s sale of Klune Industries to Precision Castparts in a hold period of just two years. Precision Castparts also announced the acquisition of another private equity portfolio company, Synchronous Aerospace Group, in November to continue their aerostructures expansion. Other high-profile exits include Warburg Pincus’ $675 million sale of CAMP Systems and Platte River’s sale of roll-up PRV Aerospace to Court Square.
With recently released 20-year forecasts from Boeing and Airbus pointing towards high-rates of production for the foreseeable future, long-term prospects appear sound. Despite the occasional turbulence, the skies ahead look clear, with continued opportunities for successful investments in the aerospace market in 2013 and beyond.