Are private equity investors going to run for the exits?
There is no question that a lot of private equity money piled into aerospace before the crash in 2008 has been tied up for far longer than planned, and many investors readily admit that their business model has changed to match circumstances. That is, they are having to run businesses rather than just turn them around and then cash out. So, it is no surprise to learn that consultants PwC are finding that as the US economy in particular has picked up in recent quarters, private equity investors have started to get back into an M&A market fuelled by the big cash balances built up by "strategic acquirers."
As PwC notes, there has been "consistent interest in aerospace deals with moderate values" - a trend that should continue for a few more quarters.
However, watch for trades between private equity firms. Aerospace is a boom industry, so while some investors may jump on opportunties to exit pre-2008 investments, others are looking for growth. Aerospace tier ones and twos are not showing too much eagerness to buy their suppliers, so private equity continues to have many good opportunities with companies that need investment. So, do not be surprised if the quantity of private money in aerospace rises this year - substantially.