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Behind The Deal With Roynat Equity Partners

Courtesy – Article By: Jon Jackson | January 22, 2018
SkyTrack Systems

Roynat Equity Partners acquired its equity stake in SKYTRAC in 2012 in support of a management buyout.

SKYTRAC is Kelowna, British Columbia-based developer and manufacturer of full-service data-driven business solutions to the non-scheduled commercial aviation industry. SKYTRAC serves over 6,500 global users with flight following, flight data and communications technology.

The CVCA caught up with Roynat Equity Partners to discuss the details of the deal.

Why did Roynat choose to initially invest in SKYTRAC?
SKYTRAC was a profitable, high margin business operating in a highly regulated sector with very significant barriers to entry. We saw an opportunity to partner with a skilled key executive inside the company (Malachi Nordine, Head Of Operations) to buy the business from the owner-operator, who was looking to retire.

SKYTRAC has a scalable business model supported by strong underlying industry dynamics and continued global growth. We saw that with proper direction and mentoring of the existing management, SKYTRAC would be able to realize its full potential.

The aerospace industry is highly regulated. Government approvals and certifications of equipment and services create strong barriers to entry. SKYTRAC also had key OEM factory positions of their products. This is rare of for a company of that size. The company had a base of predictable monthly cash flow on which to build, with an unusually “sticky” customer and revenue base. SKYTRAC had a highly technically skilled team with advanced in-house R&D capabilities and a proven track record of continuous product innovation. The SKYTRAC employees were/are passionate in their desire to solve customer problems. They are disciplined in their execution and have a strong entrepreneurial culture.

Why did Roynat choose to exit SKYTRAC?
SKYTRAC’s revenue and installation base had grown to the point where the company’s brand was well-regarded throughout the global aerospace sector. We were receiving unsolicited expressions of interest from suitors around the world. The market was telling us it was time to think about crystallizing our investment. The timing of our exit also coincided with our average hold period (five years). We believed that in the hands of the right strategic partner, the company could reach a new level of customer such as large scheduled carriers.

We partnered with a highly reputable investment bank (Philpott, Ball & Werner) who had deep aerospace connections and gave us confidence we could execute on a successful exit. They delivered and ran a very good process for us.

How has SKYTRAC grown because of Roynat’s initial investment?
During our ownership, and with buy-in from management, there was a steady change in culture from a hardware-centric manufacturing company to a sales-driven high value-services company. Several key senior management positions were added to help build depth in the organization. The company also achieved industry recognized AS9100 (Aerospace Quality Management System ISO) certification which is a notable accomplishment for a company of SKYTRAC’s size.

The company invested in training of its employees to align with a services model that continued to build on the strong recurring revenue model. The company’s mission statement evolved to “creating customer value through intelligent connectivity.” Several new high value-added services were added to the company’s product portfolio.

The company strategically ceased manufacturing its own hardware in 2014, and seamlessly implemented the outsourcing of this function. This allowed internal resources to be better focused on services. A complete re-branding and re-positioning of the business took place at the same time, which was well received by the aerospace industry. The board of directors was strengthened with deep aerospace experience and contacts, and the sales strategy of the company was completely overhauled. Revenues have almost doubled since 2012, and EBITDA has almost tripled.

What was Roynat’s experience with the management team?
When we made our initial investment, we were well aware of opportunities to deepen the management team around Malachi. As such, we brought in a seasoned aerospace executive (Stephen Sorocky) as interim CEO to lead the strategy and to assist Malachi’s development. We also made investments in finance and accounting (new VP Finance), sales and marketing (VP Sales – new position).

We were very impressed when the management invested their own money into the company. This showed a commitment to succeed and a culture/willingness to work through challenges and difficulties.

In its other core functional areas such as engineering, installation, product design, software management and customer service, SKYTRAC has long benefitted from a loyal and skilled team of lieutenants focused on execution. The company has a strong VP Finance, and its VP Sales is a star who is driving growth to new levels. Malachi has developed strongly over our five-year partnership and is now the leader of the SKYTRAC team in all aspects and is the driving force of the company.

Do you see opportunities to invest in similar companies in the future?
We are of course restricted from investing in highly similar companies due to our non-compete, however, we are actively looking at exciting opportunities in other sectors of the aerospace industry.

Is there anything particularly interesting about this exit that Roynat would like to emphasize?
All of the staff has remained intact, and the business continues to be run from Kelowna, BC. The SKYTRAC brand is maintained and the company now has channels to market with new partnerships. Key management were enticed to invest alongside Roynat at the same valuation and all wrote material cheques. Furthermore, an option pool was established to further incent these key people. This financial arrangement has led to a recent life-changing event for our operating partners through this divestiture.

Malachi is still passionate about the business and he and his management team are working to take SKYTRAC to the next growth stage.

Outside of the financial return, what other significant impact has SKYTRAC made in its community that is worth noting?
SKYTRAC has developed deep roots in the Kelowna area going back more than 25 years. It typically hires its new recruits from the tech schools and universities in the area. SKYTRAC’s annual co-op contingent is by referral only, with engineering professors often personally recommending students to come and work for SKYTRAC. Given that it is well known that meaningful, real engineering work is done at SKYTRAC as a co-op student, there is often a lineup of co-op candidates. SKYTRAC is very involved in the community, and encourages volunteerism through Volinspire.

Transaction Announcement: Delta Microwave has been acquired by Mercury Systems

Delta Microwave, Inc. (“Delta”), a leading designer and manufacturer of high-value radio frequency (“RF”), microwave and millimeter wave subassemblies and components for the military and space markets, has been acquired by Mercury Systems, Inc. (“Mercury”, NASDAQ: MRCY).  Philpott Ball & Werner, LLC (“PB&W”) served as investment banker to Delta.

Headquartered in Oxnard, California, Delta’s products boast market-leading low size, weight and power (“SWaP”), providing leading signal performance and efficiency.  Delta’s products are routinely selected over competitors due to their compact and complex packaged form factors and integrated functionality. The company is unique in its ability to integrate high performance filter and amplifier configurations into one package.

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Transaction Announcement: Prime Education has partnered with DW Healthcare Partners

PRIME Education (“Prime”), headquartered in Tamarac, Florida, a nationally recognized health care education company, and pioneer in health care quality improvement and continuing education (“CE”), has partnered with DW Healthcare Partners (“DWHP”), a healthcare-focused private equity firm.

With a 22-year history of providing interprofessional continuing education (“IPCE”) across federal, military/VA, payer, provider, academic and other settings, PRIME engages clinicians, patients, and health care leaders in collaborative learning and behavioral change to improve coordination of care and health outcomes.  Additionally, PRIME advances continuous professional development among health care providers through ten years of linking graduate medical education (“GME”) courses with IPCE, focusing on core competencies mandated for physicians-in-training by the Accreditation Council of Graduate Medical Education. PRIME’s impact has been published and presented in a multitude of peer-reviewed medical journals and national conferences, positioning PRIME as the leading health care education provider advancing the science of learning and behavior change.

“The opportunity to partner with DWHP supports PRIME’s mission to achieve and sustain measurable change in health outcomes,” noted Kathleen Moreo, Founder and CEO of PRIME. “Our goal is to continue impacting public health priorities and national health care initiatives through our learning solutions. We are energized by the vast expertise of the DWHP management team which will assist us in these critically important objectives.”

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Transaction Announcement: Moog has divested Bradford Engineering to AIAC

Moog Inc. has divested its wholly owned subsidiary, Bradford Engineering B.V. (“Bradford”), to American Industrial Acquisition Corporation (“AIAC”).  Bradford is a European developer and manufacturer of equipment for satellites and spacecraft including Attitude and Orbit Control Systems (“AOCS”), Propulsion, Avionics and Thermal solutions.  Bradford also manufactures components and subsystems such as pressure transducers, flow meters, cold gas systems, sun sensors and reaction wheels for major European satellite prime manufacturers.   Customers include ESA, NASA, JAXA, NSO, EADS-Astrium, Thales Alenia Space, OHB System, OHB Sweden, QinetiQ, The Boeing Company, IHI, NEC-Toshiba Space, Teledyne Brown Engineering and others.  Bradford will operate as a portfolio company of AIAC with no change, complementing AIAC’s existing European group of businesses and providing AIAC with an established manufacturing base for space subsystems and components in Europe.

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PB&W Attending NBAA Business Aviation Convention & Exhibition, Nov. 1-3, 2016

PB&W will be attending the NBAA (“National Business Aviation Association”) Business Aviation Convention and Exhibition (“BACE”).  NBAA-BACE is the world’s largest business aviation industry event and will feature over 1,100 exhibitors and 100 aircraft on display.  The conference will be held at the Orange County Convention Center in Orlando, Florida from November 1st through the 3rd, 2016.

For more information and to arrange meetings with PB&W, please contact PB&W Director Luke Korta at lkorta@pbandw.com.  To register for the event, please go to the NBAA website at www.nbaa.org.

large-promo-nbaa2016

PB&W Attending and Presenting at the SpeedNews Business & General Aviation Industry Conference, Oct. 4-5, 2016

Philpott Ball & Werner will be attending and presenting at the 21st annual SpeedNews Business & General Aviation Industry Suppliers Conference, held on October 4th through the 5th at the Jonathan Club in Los Angeles, California.

The conference is a leading annual gathering of executives and industry experts from equipment manufacturers, material suppliers, MRO and IT suppliers, aviation marketing and business development professionals, analysts and the financial community.  PB&W Director Luke Korta will be presenting “Valuation Trends in the Business and General Aviation Market,” covering the latest merger and acquisition transactions, public company market valuations, and future trends for the market.  PB&W Managing Director Ted Werner will also be in attendance.

For more information about the conference and to schedule meetings with PB&W, please contact Ted Werner at twerner@pbandw.com or Luke Korta at lkorta@pbandw.com.  To register for the conference, please visit the SpeedNews website.

Transaction Announcement: Westland Technologies has been acquired by ESCO Technologies

Westland Technologies, Inc. (“Westland”), a portfolio company of Mangrove Equity Partners, has been acquired by ESCO Technologies, Inc. Located in Modesto, California, Westland is the market leader in the design, development and manufacture of elastomeric-based signature reduction solutions that enhance U.S. Naval maritime platform survivability.

Westland provides sole-source mission critical technology used on a majority of the U.S. Naval fleet worldwide, including submarines (Virginia Class, Ohio Class and Los Angeles Class), surface ships (cruisers and destroyers), and aircraft carriers. Westland’s products include highly-engineered, complex tiles and other shock and vibration dampening systems that reduce passive acoustic signatures and/or modify signal (radar, infrared, acoustical and sonar) emission and reflection to reduce or obscure a vessel’s signature.

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PB&W Attending the Small Satellite Conference, Aug 6-11, Utah

Philpott Ball & Werner will be attending the 30th annual AIAA/USU Small Satellite Conference held on August 6th through the 11th, 2016 in Logan, Utah.  Small Sat is the premier conference for the small satellite industry where leading companies, scientists and industry participants come to network and showcase new technologies and capabilities.

For more information about the conference and to schedule meetings with PB&W, please contact PB&W Managing Director Ted Werner at twerner@pbandw.com.  To register for the conference, please visit the Small Sat Conference website at www.smallsat.org.

PB&W Attending ACG Boston DealFest & DealSource Select Events

Ted Werner, PB&W Managing Director, will be attending the Association for Corporate Growth (“ACG”) DealSource event in Boston on June 14th and June 15th, 2016.  DealSource is a gathering of intermediaries, corporate development professionals and select lenders throughout the Northeast and U.S.

For more information, please contact Ted Werner at 978-526-4200 or at twerner@pbandw.com.  For more information about DealFest and DealSource, please visit www.acgbostondealfest.org.

PB&W Attending SOFIC (Special Operations Forces Industry Conference), May 23-25, Tampa

Philpott Ball & Werner will be attending SOFIC 2016 on May 23rd through the 25th at the Tampa Convention Center in Tampa, Florida.  SOFIC is a leading conference for the U.S. military, partner nations, government, academia and industry stakeholders to network and discuss how to best support global special operations forces in today’s environment.  The conference will feature panel discussions and workshops, key note speakers from USSOCOM, and exhibition by leading companies across the sector.

For more information about the conference and to schedule meetings with PB&W, please contact PB&W Managing Director Nick Berry at nberry@pbandw.com.  To register for the conference, please visit the SOFIC website at www.sofic.org.