In aerospace, predictability gets deals done. In Deal Note® 184, we discussed how projections backed by precedent behavior and agreements are attractive and defendable during buyer due diligence. Buyers love knowing exactly what their top line will look like next quarter / year. This is why recurring revenue drives valuations higher. In this Deal Note®, we will discuss how businesses that build steady repeatability into their model command larger transaction values.
Recurring revenue acts as a stabilizer in an inherently cyclical market.
Essentially, it smooths out the ups and downs tied to production schedules and demand. Investors consistently pay more for slower but dependable earnings than for rapid yet unpredictable growth. A company that can show steady, repeatable cash flow will be able to better defend its future results.
Recurring revenue can take many forms in this industry. Maintenance, repair, and overhaul (MRO) services generate predictable overhaul cycles tied to fleet utilization. PMA parts provide steady re-orders as aircraft hours accumulate. Long-Term Agreements (LTAs) create subscription-like income for OEM part supply, locking in consistent revenue streams. In aerospace, customer habits, dependencies, and embedded relationships can be just as important as a written agreement.
Buyers underwrite durability… not always excitement. They pay for the confidence in cash flows. The more predictable the revenue base, the lower the perceived risk, and the greater the valuation premium a seller can expect.
Have a great day,
Max McFarland
Associate
