Aerospace investments taking off for PE

Oscar Geen
23 August 2017

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As shown with the recent investments by RhУДne Capital in VistaJet and Platinum Equity in Pattonair, PE firms are increasingly looking at the aviation and aerospace sectors for investment opportunities.

Deals in the aerospace sector are already valued at €1.7bn for 2017, the highest aggregate amount since 2007. In terms of volume there have already been nine deals, just three fewer than the 10-year high of 13 in 2011, with slightly more than a quarter of the year remaining.

However, even this does not tell the whole story as some aviation and supply chain assets come under travel, support services or electronic equipment segments, rather than the aerospace sub-sector. In the transportation services sectors, recent transactions in aviation include Oaktree Capital Management's acquisition of a majority stake in helicopter rescue company Groupe SAF, and the sale of Terra Firma- and Canada Pension Plan Investment Board-backed commercial aircraft leasing business Awas to Dubai Aerospace Enterprise.

Rhône Capital's €2.5bn buyout of VistaJet is the second aviation deal of the week after Exponent Private Equity sold its stake in Pattonair Group to Platinum Equity in a deal thought to be worth £300-400m. Philip Sanderson of Ropes & Gray, which advised on the transaction, told unquote" that the sector is attractive to private equity. "Various sectors are over-priced currently, and with the political risk associated with Brexit, some firms see aerospace & defence as an opportunity to get US and global exposure from a UK-based asset," he says.

Additionally when it is time to make an exit, buyers are in no short supply. "In North America, there are funds that specialise in this sector, which creates a very good demand for assets in the aerospace and defence sector," says Sanderson. Trade sales are also a profitable option, highlighted by ECI's sale of military navigation company Kelvin Hughes to Airbus spinout Hensoldt in June, which generated a 3.3x return for the GP. Earlier in the year, Hensoldt also purchased an aerospace company from Equistone, buying Euroavionics for an undisclosed value in May.