Private equity (PE) is an alternative investment class that primarily invests in or acquires private companies. PE firms may also perform take-private investments, where a PE firm will buy out a publicly-traded company (acquiring all outstanding shares from public shareholders), resulting in a private ownership. PE firms typically acquire significant stakes in businesses, aiming to optimize operations, achieve growth, and eventually sell the company at a profit. Historically, the average PE hold period (time between acquiring a business and selling the business) is 4 to 5 years on average. However, that average has increased over the last few years to 5 to 6 years, attributed to economic factors such as COVID and fluctuating interest rate environments. There are a large variety of investment strategies and fund types within the PE industry; for the purposes of this article, we examine investment firms primarily acquiring majority equity stakes in growing, mature businesses within the Aerospace & Defense industry. The types of investment firms that fall within this characterization include traditional leveraged buy-out PE funds (typically consisting of pooled capital from pension funds, insurance companies and other outside institutional capital), and private investment firms commonly known as “family offices,” which are investment vehicles consisting of capital provided from one or more wealthy families without outside capital investment.
The Aerospace & Defense sector is characterized by high barriers to entry, significant R&D requirements, and stringent government regulations. These factors make it a prime target for PE firms with relevant industry expertise and capital resources. By partnering with Aerospace & Defense companies, PE firms often seek to provide value to the companies they acquire by leveraging its network of experienced industry executives, both from an operational and customer perspective, as well as through greater capital access for growth, including strategic M&A consolidation, capital expenditures, and R&D into new products or services.
Overall, private equity as an acquirer in the A&D industry has continued to growth its robust activity in the market. With strong demand fundamentals across the commercial aerospace, defense, government, and space end markets, private equity continues to deploy significant capital into the A&D ecosystem. PE’s share of total M&A deals in the A&D market continues to rise year to year. A few areas of particular PE activity include:
Amid geopolitical tensions, there has been a surge in investment in defense technology. Private equity buyers are prioritizing companies specializing in defense electronics; C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) and electronic warfare products; federal services and national security solutions such as AI/ML, cybersecurity, and IT modernization; unmanned platforms; space technology; and other specialty defense businesses.
As commercial air travel rebounds post-pandemic, in addition to increasing longevity of current in-service aircraft due to OEM supply chain challenges, PE firms are showing increased interest in companies in aftermarket services including MRO (maintenance, repair, and overhaul), distribution and logistics, spares and PMA replacement parts, and modifications.
PE firms are pursuing bolt-on acquisitions, integrating smaller companies into existing portfolios to create industry leaders. This a popular playbook being utilized by PE firms primarily in the A&D manufacturing space, with a robust level of activity in segments such as engineered, proprietary aerospace parts and build-to-print precision manufacturing firms with specialized capabilities.
Janes Capital Partners maintains a proprietary transaction database of M&A deals in the Aerospace & Defense industry. This database includes categorization by buyer type, such as publicly traded companies, privately held companies and private equity firms.
To identify the top five (5) most active PE buyers in the A&D industry, we analyzed our proprietary transaction database by the number of deals every PE firm has completed from 1/1/2022 to 6/30/2024. Deal dollar volume was not a viable criterion because PE firms typically do not disclose purchase price or valuation terms. In virtually all instances, the most active PE buyers in the industry employ an active buy-and-build strategy, resulting in a high number of “add-on” or “bolt-on” acquisitions.
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Janes Capital Partners stands out as a leading advisor in the Aerospace & Defense sector, providing unparalleled expertise in mergers and acquisitions. Our deep industry knowledge, proprietary insights, industry-specific relationships, and 25+ year Aerospace & Defense M&A experience and track record, empowers clients to make informed decisions. Key resources include:
Explore our insights and case studies on our blog or contact us to if you would like to discuss potential M&A advisory services.
For businesses considering private equity partnerships or transactions, understanding the dynamics of PE activity in the Aerospace & Defense market is crucial. Janes Capital Partners regularly publishes market insights covering PE activity in the industry. In addition, our firm has extensive experience working on M&A transactions with Aerospace & Defense private equity firms, which we leverage when advising our clients on their M&A processes, which often includes evaluating private equity investment options.
Private equity firms play an important role in Aerospace & Defense, and is growing source of capital for both liquidity and growth. Staying informed about the most active private equity buyers and their strategies is critical for businesses considering future PE partnerships or transactions. Janes Capital Partners offers the insights and expertise you need to navigate the dynamic PE market successfully, particularly within the Aerospace & Defense sector.
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