With global air travel up about 7 percent, according to the International Air Transport Association, airlines, including American Airlines Group Inc. (NASDAQ: AAL), are upgrading their fleets. Carriers are ordering new aircrafts, making companies that make parts attractive targets.
The most high-profile deal in the sector is the $37 billion purchase of Precision Castparts by Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK.A). In the months leading up to the deal, Precision was busy buying up rivals. First, Precision said it would buy Composites Horizons LLC, which makes high-temperature composites used in engines, from American Industrial Partners for undisclosed terms. Then, Precision said it would purchase Noranco Inc., which makes parts for engines and landing gear, from MidOcean Partners and PSP Investments, for $560 million.
Heico Corp. (NYSE: HEI) has also been active in the aerospace sector. Earlier in 2015, the airplanes parts maker completed the acquisition of data collector Midwest Microwave Solutions Inc. and announced plans to buy composites maker Astroseal Products Corp. In addition, Heico is purchasing F-16 parts maker Aerospace & Commercial Technologies. Heico indicated that will look for additional acquisitions in the aerospace manufacturing sector.
PE firms have been raising funds specifically to acquire aerospace companies. For instance, earlier in 2015, Apollo Aviation Group (not affiliated with Apollo Global Management LLC) raised its third fund, valued at $833 million. The firm owns 18 planes with the majority of them being leased to airlines, while the rest of them will be sold or taken apart and sold for parts.