GP Profile: Tikehau’s Aerofondo set for aerospace industry take-off after first deal from debut fund

Launched last June, the fund has so far raised EUR 100m and aims to reach EUR 150m-EUR 200m. It is expected to be deployed across eight to 10 platform investments over the coming years in Spain, said Cavero. Tikehau Ace declined to comment on the fundraising timeline.

As well as securing backing from Tikehau, the fund has so far received commitments from SEPIDES, an investment arm of the Spanish government; Airbus; and Indra, a Spanish defence systems specialist, according to a statement. The strategy aims to tap into the Spanish aerospace industry, which generated EUR 11.4bn in 2020, said Carmen Alonso, the head of the UK and Iberia, in a statement.

The strategy will look across the whole aerospace ecosystem in civil, defence and space, he said. Niches it can consider can range from electronics to avionics, software, technology, as well as airport and MRO engineering services, among others, Cavero said.

“We will be looking at the entire industry, with reindustrialisation being a key theme,” he said. “There are certain parts of the industrial segment within aerospace which were not so interesting (and which were outsourced outside of Europe) in the past, but are going to be more interesting because of the reshoring and reindustrialization trends in Europe.”

Driving consolidation
Defence – an area that had not seen “spectacular growth” in the past – will be an area of focus, especially in light of the current geopolitical backdrop, Cavero said, noting, for example, Germany’s EUR 100bn fund to modernise its armed forces.

Another theme that the fund will look into is technology that can help with the reduction of carbon footprint, an acute topic in civil aviation, he said.

Consolidation will also play a prominent role for the strategy, he said, noting that the industry is highly fragmented, with the fallout of the Covid-19 pandemic exposing the many challenges that small players are facing, he said.

This strategy was in play for the fund’s first acquisition last week, which came in the form of Acatec, a Madrid-based specialist in precision machining. The GP will look for bolt-ons domestically and abroad, he said.

Initial equity investments in platform companies can range from EUR 7m to EUR 20m, although the fund can provide larger cheques through its co-investment capabilities, including with other funds managed by Tikehau Capital or external GPs, he said.

Patient approach
The fund is expected to have a ten-year duration, with an optional two years’ extension to reflect the longer investment period that may be needed to allow some capex-heavy aeronautic groups to produce a return, Cavero said.

“We still have a long time ahead of us and we would be patient looking at opportunities,” Cavero said.

Challenges that the aerospace industry is facing include the ongoing effects of the Covid-19 pandemic, when travel took a hit and weighed on the entire industry; and, equally importantly, the recall of the Boeing 737 MAX following two fatal crashes.

The pandemic has also had a knock-on effect on the ongoing supply chain issues, as well as inflation in raw materials and energy, he acknowledged.

“We have some short-term and medium-term situations, but we're very bullish on the aerospace sector,” he said, adding that travel has been growing at a strong pace in the last 20 years. “After Covid, we will get back to travelling as we did before. It's going to take some time, but it's going to happen - international travel is going to recover for sure.”

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