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How Do Private Equity Firms Operate?

By Generational Equity

09/21/2016

Loyal readers of this publication know that from time to time I deviate from our standard topics when I see a specific transaction that catches my attention. The headline of this one did:

Liberty Hall Remains Acquisitive, Backs Aerospace Parts Supplier ZTM

After further research, it turns out that Liberty Hall Capital Partners, a “private equity firm (PE) focused exclusively on investments in businesses serving the global aerospace and defense industry” has invested some $2.3 billion in equity capital in 21 acquisitions since 2000. Further, according to their website, 11 of these investments have been “platform” companies with the remaining 10 being comprised of “add-on” acquisitions.

For those of you unfamiliar with these terms, generally speaking, a platform company is a larger investment, typically an initial foray into an industry niche and the subsequent “add-ons” are smaller, synergistic fits that are a good vertical or horizontal fit with the platform. As you can see, Liberty Hall is quite focused on add-ons for their platform (a.k.a. portfolio) companies.

Getting back to this specific acquisition, according to Mergers and Acquisitions magazine, ZTM is going to be “integrated with Liberty Hall portfolio company Accurus Aerospace Corp.” ZTM, founded in 1989 and located in Wichita, Kansas, supplies parts to airplane manufacturers. “Accurus was formed by Liberty Hall in 2013 and has purchased Precise Machining & Manufacturing in 2013; McCann Aerospace Machining in 2014; and LaCroix in 2015.”

According to Liberty Hall partner Rowan Taylor, the addition of ZTM “reinforces our strong relationships with our largest customers and extends Accurus’ geographic presence.” According to the Liberty Hall website, “Accurus is a leading Tier II supplier of highly engineered machined parts, kits and assemblies and processing services.”

So a couple of key takeaways from this news that stand out to me: First, Liberty Hall is actively pursuing a synergistic expansion of the platform company they formed in 2013. You can clearly see this from the four add-ons they have acquired in less than three years. In addition, since the ZTM acquisition, they have also expanded the Accurus leadership team by promoting Robert A. Kirkpatrick to president of Accurus and elevating four “professionals in its senior management team.” This tells us that their growth plans are only in their infancy and that they have more strategic investments on the horizon in this niche.

Secondly, based on the backgrounds of the four individuals promoted last month, it is evident that the leadership teams are being retained in most of the add-ons they are making. This is a classic buy-and-build strategy that equity firms specializing in the lower middle-market deploy. It is truly a win-win for all parties as it enables the equity firm to retain key talent and it also allows existing ownership teams to participate as equity owners in the new, growing entity with a potential second bite of the apple later when the larger new company is sold or taken public.

As we have examined in past articles, this can be a compelling reason to find an equity firm to participate in your future growth. Here is how a few of our clients have described their experiences with PE firms we have helped partner with them:

The gist of all these commentaries is essentially the same: Partnering with a PE firm can provide huge benefits to not only existing ownership but also key employees and even customers.

As Matt Matich points out in the third segment above, “Customers have come to us post-transaction with technology needs and now we can meet those needs because we have the backing of a PE firm.” This is one of the underpublicized but critical post-investment benefits that deeper pockets and financial backing can bring business owners – a path to better service clients and by doing so, solidify the company’s future. Again, a win-win.

Now, some readers might say to me, “Well this transaction is in a sexy industry with lots of upside; my industry is far less attractive to PE.” To that my reply is simply this: If you go back and look at all the posts we had done over the years that examine transactions, you will find PE firms active in a huge number of industries, and odds are good one (or more) are operating in your niche, you just may not be aware of it since these transactions often fly under the radar of business media.

The best way to learn more about professional buyers like these is to attend a Generational Equity exit planning seminar. We hold these throughout North America and they are designed to take a business owner with zero knowledge of the M&A process to a point where he/she can actually begin to plan for an exit.

To learn more call us and ask to speak to one of our senior business advisors about your seminar program and other services that Generational Equity provides. Our toll free number is 972-232-1121. Or if you prefer, you can reach out to us via our website:

By Carl Doerksen, Director of Corporate Development at Generational Equity.

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