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Mergers in business aviation should heat up

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Mergers in business aviation should heat up
After a couple of drowsy years, mergers within the business aviation industry should start heating up as corporate balance sheets and private equity firms are loaded with piles of cash that need to be deployed.


October 19, 2010
By Carey Fredericks

Oct. 19, 2010, Atlanta, GA – After a couple of drowsy years, mergers
within the business aviation industry should start heating up as
corporate balance sheets and private equity firms are loaded with piles
of cash that need to be deployed.

That’s the feeling of Charles Harris, a principal of Houston-based Stoneworth Financial, LLC (www.stoneworthfinancial.com), who says his firm is seeing a lot of activity in the services side of general aviation. “People are trying to amalgamate different services and service offerings.”

Over the past several years Stoneworth Financial has become an active mergers firm in the business aviation industry, particularly for middle market companies with revenues or enterprise value between $20 million and $250 million.

Last January, Rockwell Collins, Inc. completed the acquisition of Stoneworth Financial client, AR Group, Inc., and its affiliated companies, including Air Routing International, a provider of trip support services for business aircraft flight operations. In 2008, Medex Global Group, acquired another Stoneworth Financial client, ASI Group.

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“Today we are speaking to quite a few large equity funds dedicated to the aviation industry,” Harris said. “They are asking what companies are on the table and where can we invest. That has happened only within the last few months.”

Richard Agee, the former chief financial officer for Air Routing who recently joined Stoneworth as one of the three principals guiding the company along with Harris and Evan Betzer, said, “with the economy and aviation industry coming out of the doldrums, it is more of a time to buy because there are some good deals out there in this environment.

“Certainly anybody who just wants to sell a company at a desperately low price, those deals are easy to do,” Harris said. “Given today’s economic climate, pitching the company correctly to a buyer is really important. We find a way to get both the buyer and seller optimal pricing, value and structure. The AR Group sale to Rockwell Collins is an example of that. This strategic deal was ideal for both organizations. Each got what they wanted.”

Richard Wilkens, co-owner and co-founder of the AR Group, said Stoneworth Financial’s strength was “its flexibility in adjusting to negotiations and discussions with what our needs were as offers came to us in the negotiation process.”

In 2004, Stoneworth Financial began providing corporate development advisory help to AR Group. Like many middle market companies, AR Group was approached on a frequent basis with acquisition offers and investment opportunities; they wanted to make sure that bankable offers and strategic investments both were given proper consideration.

Over the ensuing five years, Stoneworth Financial assisted the company in completing several investments, acquisitions, and divestitures, culminating in the sale to Rockwell Collins. During the period, AR Group added significant franchise value, clarified its value proposition and strengthened its competitive advantage. Stoneworth Financial worked hand in hand with other AR Group key advisors to ensure optimal deal structure and execution.

Stoneworth Financial believes this transaction is representative of the return of strategic buyers to the middle market M&A landscape.

“Stoneworth’s key value in helping put together the Medex-ASI Group deal was how it insured synergies in the acquisition to insure proper valuation and cultures,” said ASI President Charlie LeBlanc. “This was an outstanding fit for both companies, strategically, operationally and culturally. Stoneworth proved it has a high knowledge of the entire aviation industry.”

Harris said that today general aviation is under serviced from the financial and M&A perspective. He feels that what sets Stoneworth apart from other financial companies dealing in the business aviation industry is Stoneworth’s aviation industry knowledge which was recently bolstered with the addition of Agee to the team.

“Stoneworth’s approach to structuring M&A deals is different than typical investment banks,” he said. “We become part of the company we work with. We do not view ourselves as brokers. We view ourselves as part of a corporate team for the company.

Agee, who was with Air Routing when Rockwell Collins deal was in the works, described Stoneworth Financial as ‘our outsourced M&A department’.