If you are considering selling your middle market middle-market aerospace and defense company to a private equity firm, it is important to understand how your business will be classified by the buyer. By classification, we mean “Bolt-On” versus “Platform”. This distinction isn’t just about nomenclature or semantics—it directly shapes valuation, deal structure, and the universe of private equity firm buyers.

  • Platform acquisition is a private equity firm’s starting point in a particular investment thesis or industry sector. These are larger companies (typically with more than $100MM in revenue), a diverse customer base, audited financial statements, and most importantly, a complete executive suite (CEO, COO, CFO, CRO, and CTO)
  • Bolt-on acquisition (also called a “tuck-in”) is an add-on to an existing platform owned by the private equity firm. These are smaller companies (typically with less than $50MM in revenue), frequently have customer concentration, do not have audited financial statements, and often do not have a broad executive management team.

Both can have great outcomes—but they’re not priced the same way. Platforms command much higher prices. Why? It is not just because they have more earnings. They are more valuable because a private equity firm has decided that your business is the foundation (aka platform) for an investment thesis. It is because they are going to deploy additional capital into and around this business. They are paying a premium to have, on day-one, a complete executive suite of managers, capable of integrating numerous future “Bolt-on” acquisitions and leading the business through substantial growth. And they are paying a premium because the company has more scale, and less customer concentration.

Smaller (Bolt-on) sellers, in contrast, do not receive “platform” premiums from private equity firms because they don’t need to pay for the foundational attributes noted (executive management, scale, diverse customer base).

While this may seem to signal bad news for the owners of “Bolt-Ons”, smaller sellers can receive premium pricing from Private equity firms. But rather than a “platform” premium, these smaller sellers can receive premium pricing from private equity firms. When a smaller seller enters into discussions with a private equity firm with a Platform that is a good strategic fit, that buyer becomes essentially a strategic buyer, with the opportunity to increase revenue and expand margins through operational efficiencies gained by merging the seller into its operations. In this case, the smaller seller gains a strategic premium from the private equity firm.

Knowing how you, as a seller, are perceived by each potential buyer is critical to optimizing your sale process. I hope the above helps you when you consider selling your middle-market aerospace and defense company.

Have a great day,

Troy Medieros
Vice President