PB&W News

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.

PB&W Donates to Hurricane Harvey Disaster Relief

In response to the widespread devastation caused by Hurricane Harvey in Texas, PB&W has contributed to the Salvation Army to help provide food, emergency shelter, relief supplies and comfort to those affected by the storm.  We encourage both individuals and corporations to also support the charities and critical organizations working to assist those in need.

To contribute to the Salvation Army hurricane relief efforts, please go to the Salvation Army website at www.salvationarmy.org and click on “Donate Now”.

 

Bradford J. Petitpas joins the PB&W team

PB&W is pleased to announce the addition of Brad Petitpas.  Brad will join PB&W as an Analyst and member of the M&A and business valuation teams.  Brad graduated summa cum laude from Bentley University in Massachusetts with a Bachelor of Science degree in Economics and Finance.  Brad will be working in PB&W’s Boston office and will support the Company’s M&A services, along with providing analysis for valuations, fairness opinions and industry research.

PB&W promotes Matt Carpenter and Luke Korta to Managing Director

PB&W is pleased to announce the promotions of Matt Carpenter and Luke Korta to Managing Director.  Both Mr. Carpenter and Mr. Korta are long-term members of the PB&W investment banking team.  Mr. Carpenter co-leads the industrial/controls/energy and healthcare industry verticals for the firm while Mr. Korta co-leads the Aerospace/Defense sector.  For more information and contact, please see Mr. Carpenter’s bio and Mr. Korta’s bio.

PB&W Supports the Wounded Warrior Project and the MFLCF

PB&W has again donated to the Wounded Warrior Project in support of the project’s mission “To honor and empower Wounded Warriors”.  PB&W also supports the Military Family Lifestyle Charitable Foundation (“MFLCF”).  The MFLCF supports the financial, physical and emotional needs of military members and their families by partnering with and funding critical service member support organizations.

The employees of PB&W strongly support our nation’s veterans who have served to protect our freedoms and the core values of the United States of America and its allies.  We encourage both individuals and corporations to also support these critical organizations or other charities working to assist our soldiers, veterans and their families.  For more information about the Wounded Warriors Project and the MFLCF, please visit their respective websites at www.woundedwarriorproject.org and www.mflcf.org.

Wounded-Warrior-Project-Logologo-mflcf1

Erik Appareti Promoted to Vice President

We are pleased to announce that Erik Appareti has been promoted to Vice President at Philpott Ball & Werner.  Erik joined the firm in 2010 having graduated from the University of Denver with a degree in Corporate Finance.  Erik has been instrumental in supporting the firm’s aerospace and defense technology sector and will continue to focus on deal generation and support of transactions across multiple market sectors.  He is a FINRA Registered Representative and holds his Series 79 and 63 licenses.  For more information, please contact us.

 

Erik Appareti, Vice President

Philpott Ball & Werner, LLC

978-526-4200 – Beverly Massachusetts Office

eappareti@pbandw.com

 

 

PB&W Supports the Wounded Warrior Project

PB&W has again donated to the Wounded Warrior Project in support of the Project’s Mission “To honor and empower Wounded Warriors”. The employees of PB&W feel strongly in supporting our nation’s veterans who have served to protect freedom, equality and the core values of the United States of America. For more information on the Wounded Warriors Project, please visit their website at www.woundedwarriorproject.com.

Bret Kuchenbecker Joins the PB&W Team

PB&W is pleased to announce the addition of Bret C. Kuchenbecker.  Bret will join PB&W as an Analyst and member of the M&A and business valuation teams.

Bret graduated magna cum laude from Bentley University in Massachusetts with a Bachelor of Science degree in Economics and Finance while also participating on the varsity soccer team.  Bret will be working in PB&W’s Manchester Office and will support the Company’s M&A services, along with providing analysis for valuations, fairness opinions and industry research.

Philpott Ball & Werner is a private investment bank advising companies which produce highly-engineered products for the aerospace, defense, industrial controls, communications and technology markets.  PB&W has offices in Manchester, Massachusetts and Charlotte, North Carolina.