Carve-out Snapshot Recent transactions include:
$10B+
Thoma Bravo acquired parts of Boeing’s Digital Aviation Solutions business Howmet Aerospace acquired Stanley Black & Decker’s Consolidated Aerospace Manufacturing business Tinicum portco and Blackstone acquired TriMas Aerospace from TriMas AE Industrial Partners acquired L3Harris’ space propulsion, electronics, and power systems businesses Advent International acquired aerospace and defense assets from Coherent Corp.
$1.8B
$1.45B
$845M
$400M
Sources: Press releases
A Scalable Platform Today’s A&D carve-outs tend to be strong, stable business units rather than undesired cast-offs, say M&A advisors. They might not have the fast-paced growth that the corporation and its investors are seeking, but they’re attractive assets, nonetheless. The long-term contracts that many A&D businesses have with gov- ernment agencies are a big part of the sector’s growing appeal. A manufacturer of a weapons system component, for example, will almost certainly have a contract for the lifespan of that weapon. A&D companies’ predictable, recurring revenue model is not unlike that of the software industry, which saw its own flood of investor interest in the 2010s. “It’s sort of the new SaaS,” says Mirus’ Minar. As they evaluate carve-out opportunities, private equity sponsors are seeking businesses with strong fundamentals and a clear path to create value post-close. Solid revenue and attractive margins, a strong customer base, and a clear cost structure are all attractive qualities, says Andy Camposeo, director at Mirus Capital. Sponsors are especially interested in future opportunities for market expansion and penetration, and in a carve-out scenario, they want to see that the separation costs are manageable, he adds. Carve-outs can also benefit from a technology upgrade in many cases, notes Adams. Artificial intelligence and other technologies can help
the business become more efficient and improve its offerings under its new ownership. “How are they using AI as they continue to develop their solutions, capabilities, products, and software, and as part of their delivery to their customers?” she says. “Everyone is looking at how to modernize and strengthen the infra- structure of a carve-out, stabilize it, and scale it. Then you can continue to either acquire and add on to that carved-out entity, or enable a future exit in whatever form that might be, whether an IPO or otherwise.” // KATIE MALONEY is ACG’s vice president of communications and content.
ACG MAGAZINE 17
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