AGC Aerospace & Defense

[nonmember]Oklahoma based Acorn Growth Companies is not a traditional private equity company. It focuses exclusively on aerospace and defense investments and relies on a select group of family offices and high net worth individuals in Oklahoma and Texas.::join::[/nonmember][ismember]

Oklahoma based Acorn Growth Companies is not a traditional private equity company. It focuses exclusively on aerospace and defense investments and relies on a select group of family offices and high net worth individuals in Oklahoma and Texas. Nearly all of its investors have made their money through oil and, perhaps because of this, they tend to take a longer view.  The fund does not have much pay-out pressure and relies on organic growth rather than selling companies.  

Originally launched as Acorn Growth Companies its investment strategy has changed. It originally followed a more traditional approach of investing in small mid-market companies, now it buys up small companies focused on aerospace and aviation.  Aviation, particularly maintenance, repair and overall (MRO) is an important industry in Oklahoma City. The city is the base for the US Air Forces’s Air Logistics Centre which employs over 15,000 military, civilian and contractor employees. But most importantly, ACG believes investors get good returns.

“We looked at aerospace and aviation and saw that the capital markets tend to stay away from these markets. The defense industry is very regulated and reliant on government contracts and this squeezes out many lenders,” says Rick Nagel, one of the firm’s three managing partners. “The private aviation market is even more volatile – so you don’t see many banks or traditional equity firms. This means there are opportunities for new players.”

AGC sees the secondary market – firms supplying parts or MRO to older aircraft – as more stable than the new aircraft market.

The fund’s investments are split into four groups: integrated defense; composites; finance and services. Integrated defense includes companies like Commuter Air Technology (CAT), which modifies commercial and defense aircraft, and The ServiCentre.

Integrated Composites and Unitech Composites make up the composites group. Both supply major manufacturers including Boeing, Lockheed Martin, Airbus, Cessna, Bell, Gulfstream, Hawker Beechcraft and others.

Singlepoint is the major part of the finance group. It specialises in smaller aircraft deals for private buyers and defense ones – particularly the US government – and has also started leasing commercial aircraft engines. Led by Timothy Wilson it has closed a number of deals targeting older aircraft deals. “When the bank says no, we can say yes,” says Nagel.

The services group includes third party logistics and government service business.

Although AGC already has international customers, Nagel says the firm is now looking to buy international to add to its portfolio.  “We are keen to find European companies before looking to Asia. And whatever we look at will be in aerospace or defense.”

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