As the year comes to a close dealmakers are looking for transactions that can add value to an investment platform with a shared ideology and goal. Sky Peak Capital, a New England-based private equity firm, believes there is an opportunity within precision machining firms.

Sky Peak Capital has acquired Hicks Machine, a precision machining shop that provides a variety of parts to customers across the aerospace & defense, medical, microwave and commercial industries. The deal also represents Sky Peak’s formation of Excelus Manufacturing Solutions, the firm’s acquisition vehicle within the precision manufacturing sector.

In looking towards 2023, Sky Peak anticipates a high demand and consolidation within the industries for both financial and strategic buyers. As the workforce ages out and retires over the next five to seven years firms are looking to solve market issues but also are interested in acquiring talent. Excelus says it is interested in deepening resources in its precision machining offerings across sheet metal fabrication, welding, additive manufacturing, and 3D printing of alloys and metal.

“I think Hicks Machine really checked all the boxes that we were looking for,” says Mike Burke, founder and managing partner of Sky Peak Capital. “From a talent perspective, they’ve got fantastic people. They’ve got folks that have grown with the company over time. They’ve got individuals that have a deep knowledge base of the end market that they’re in. I think Hicks has built a brand and a name for itself in New England for being able to handle very complex, intricate and highly demanding parts for highly discerning customers, and so all of those together mixed with the end markets and the ability to what we believe is, is further penetrate those end markets was very attractive to us.”

Burke explains that getting good parts manufactured on time has been incredibly difficult even before the now cliched Covid pandemic-related supply chain issues.

However, the firm has identified a tremendous amount of manufacturing reshoring, not only in North America and the U.S. but regionally as well. The firm believes there is demand and opportunity within the precision manufacturing space as quality issues and pricing have caused an increased demand for domestic manufacturing.

“We’re able to bring prices down and be even more competitive internationally,” says Burke. “We’re seeing a strong amount of demand on the industrial and the commercial side. On the aerospace, defense, and space side of things we are noting a lot of those programs are ramping up. I think federal budgets aren’t slowing down for DoD, they’re probably accelerating. I think space initiatives are accelerating and all of those components need to stay within the U.S. I think it is a critical time in the sector.”

Have you noticed precision manufacturing trends including a return to the domestic market? Let me know your thoughts on the market at [email protected]

Cole Lipsky