There is substantial fascination with the aviation and aerospace industry. Many aviation lovers and investors are interested in purchasing an established company at a fair price. This review discusses how owners of an aviation and aerospace company can sell for fair market value or higher. We also discuss how to determine the value of your company and the importance of working with a business broker who understands your industry to help you throughout the sales process.
About The Aviation and Aerospace Industry
The aviation and aerospace industry includes a variety of business types. In particular, the FBO industry is exploding and fixed-based operators companies (FBOs) receive great valuations. The most common services within the aeronautical industry include:
- Tie-down and parking
- Aircraft rental
- Aircraft maintenance
- Flight instruction
Maintenance, repair, and operations companies (MROs) also are seeing substantial growth. This includes services such as functional checks, servicing, repairing equipment, etc. The aviation and aerospace industry is a complex industry with a high barrier to entry. However, for investors who have aviation experience and understand the intricacies involved with aviation and aerospace companies, established organizations are intriguing and exciting investments.
A Market-Based Valuation for Your Aviation and Aerospace Company
A market-based valuation uses your seller’s discretionary earnings (SDE) and/or your earnings before interest, taxes, depreciation, and amortization (EBITDA) along with industry multiples (rule of thumbs) to formulate a tentative fair market value (FMV). The acquisition multiples for the aviation and aerospace industry are:
- Aviation and aerospace companies sold between 2.16 and 3.91 times the Seller’s Discretionary Earnings (SDE)
- Aviation and aerospace companies sold between 2.73 and 9.85 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Aviation and aerospace companies sold between 0.57 and 0.73 times the annual net sales
Although far too many brokers rely upon this data when selling a company, it is important to consider all other details of your company that may not show up on financial reports, such as your growth potential, the quality of your workforce, your vision, and your reason for selling.
A Guide to Selling Your Aviation and Aerospace Company
You can sell your aviation and aerospace company in six steps by using the process below. Of course, your experience may vary slightly based on the specifics of your company’s sale. However, in general, the six steps include:
- Choose a business broker
- Plan and prepare for the sale
- Connect with potential buyers
- Negotiate a deal with the right buyer
- Allow the buyer to review the sale details
- Close the sale and transfer ownership
Here is a detailed look at the sale process for aviation and aerospace companies. This should help you prepare and understand what to expect along the way. We recommend beginning with a professional market-based valuation.
Step 1: Choose a Business Broker
Selling an aviation and aerospace company is far different than other types of sales. You are not publicly listing your company for sale. Instead, you are selling in a confidential manner to ensure your business operations are not disrupted or news of a potential sale does not lead to employee or client fears.
Due to this, we strongly recommend working with an experienced business broker that has connections with hundreds of potential buyers. They can help you through the process, from providing an accurate market-based business valuation to helping you with the closing stages of the sale. Most importantly, they maintain confidentially while finding you a buyer who is willing to pay fair market value and meet your other goals.
Step 2: Plan and Prepare for The Sale
As discussed, your business broker will assess your company’s financial information, growth potential, etc. to determine how much potential buyers are willing to pay. They will also help you plan the right time to sell. It is important to get the timing right and sell when the market is favorable and allows you to get the maximum value. You should also prepare all of your financial, legal, and organizational information. This includes the following documents:
- Tax returns
- Profit and loss statements
- Cash flow statements
- Balance sheets
- Inventory reports
- Fixed asset reports
- Aircraft maintenance report
- Aircraft registration documents
- Aircraft insurance policies
- Aircraft lease agreements
- And more
Preparing these documents ahead of time helps ensure successful and fast negotiation, due diligence, and closing processes. This stage may also involve other planning tasks. For instance,
Step 3: Connect With Potential Buyers (Via Your Business Broker)
It helps to have a business broker in your corner that works hard to connect you with a buyer. For many, this is the best part about working with a business broker. They do much of the work for you, leveraging contacts, networks, databases, and more to find you a buyer. Additionally, they do so in a confidential manner, so news of your sale is not made public. Depending on the specifics of your situation, they may even utilize blind listings, which involve advertising your aviation and aerospace company in an anonymous manner. This works by providing all necessary information but not disclosing the company name or location.
Step 4: Negotiate a Deal With The Right Buyer
You will then need to review offers, negotiate, discuss contingencies, and select a buyer; your broker remains hands-on throughout this process as well. In many cases, selecting a buyer goes beyond simply accepting the highest offer, especially if you have goals beyond the financials (i.e. keeping certain employees, continuing your long-term vision, etc.). This stage ends with the buyer you choose signing a letter of intent (LOI) that establishes the purchase price, payment terms, contingencies, and more.
Step 5: Allow The Buyer to Review The Sale Details (Due Diligence)
Due diligence provides an opportunity for the buyer to review all information and ensure they are comfortable moving forward with the sale. Keep in mind, a deal has already been agreed upon and the buyer has signed a letter of intent. So, this is usually a formality and an opportunity to verify all financial information and learn more about the company.
During due diligence, you can expect the buyer to request financial, legal, and organizational documents (i.e. tax returns and P&L statements), ask a series of questions to learn more and clarify details, and request a walk-through to learn more about the daily operations for your aviation and aerospace company. In some cases, they may meet with your business partners (if applicable) or executives that are essential to the company.
Step 6: Close The Sale and Transfer Ownership
After due diligence, the seller and the buyer (along with their respective attorneys) meet to complete the deal at the closing table. This involves a final review of the purchase agreement and attaining the necessary signatures. The business is also transferred over to the buyer during closing, along with notifying employees, clients, business partners, etc.
Are You Considering Selling Your Aviation and Aerospace Company?
Sigma Mergers and Acquisitions works with business owners in the aviation and aerospace industry to help sell their company for fair market value or greater. If you would like to learn more, have questions, or are ready to get started, contact our brokerage and consultancy today and schedule a consultation.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!