Imeggable Holdings’ acquisition of Air Parts Ltd. is the first in the buyout fund’s strategy of consolidating small defense-equipment suppliers in the U.K., group partner Stephen Greenwood said.
The company has raised about 150 million pounds ($240 million) in debt funding to finance purchases as it targets manufacturers posting annual sales of 25 million pounds or less, Greenwood said in a telephone interview. Centric Commercial Finance Ltd. was one of the main lenders for the Air Parts takeover, which was completed in October, he said.
Declining European defense budgets and equipment makers’ demands for larger, more financially resilient suppliers are creating pressure on smaller businesses to join forces or seek larger partners. Ultra Electronics Holdings Plc, a U.K. military-communications equipment provider that’s the world’s biggest sonar manufacturer, said in July that it’s looking for more purchases following eight acquisitions in two years.
“This industry is now set to consolidate,” Greenwood said. Imeggable will explore purchases of component providers and services companies as long as they are focused on the defense market, he said.
Among targets for the Gibraltar-based buyout fund are retiring owners looking to dispose of their companies, Greenwood said.
“There is quite a bit of pent-up demand from people who want to sell their business,” he said in the Nov. 5 interview.
Air Parts is a Woking, England-based producer of brackets, bolts and other items for manufacturers such as London-based BAE Systems Plc, Europe’s biggest defense contractor. Imeggable started working on the takeover in August, said Greenwood, who is serving as chief executive of Air Parts.
The purchase represents the first deal around which other acquisitions will take place, and the buyout strategy includes keeping much of the existing management team, he said.
Centric Commercial Finance provided asset-backed financing for the takeover, Greenwood said. That form of funding was used, rather than private equity, to avoid saddling Air Parts with high interest payments, he said.