GTCR hoping third time lucky with JSSI
CJI Americas 2020 was exceptionally upbeat this week and there are a lot of reasons to be optimistic. But although they understand the issues better, people who have dedicated a significant part or their career to an industry are naturally biased because they want it to grow. You could see clear evidence of this in all the 2009-2012 show daily headlines predicting: business aviation is set to soar/take-off/fly.
You also need people outside the industry to validate any optimistic thesis and, even better, be willing to back it with cash. Yesterday, GTCR, a leading private equity firm, announced that it is buying a majority stake in Jet Support Services, Inc (JSSI). It has not revealed how much it is paying, but the Book family is keeping a “significant minority stake”.
“GTCR is investing in our management team and we are rolling over our own equity,” Neil Book, President and CEO, of JSSI told Corporate Jet Investor. “They see JSSI as a company that has seen significant and substantial growth year-on-year and has performed strongly in 2020 – a year that has tested every company.”
Of course, even the smartest investors can get things wrong. Many of the headstones in the business aviation corporate graveyard were paid for with private equity money. But GTCR understands business aviation industry better than most private equity firms.
In 2012 it acquired CAMP Systems (which includes AMSTAT) and got a good return selling it to Hearst in 2016. GTCR also invested in FBO chain and operator Landmark Aviation in early 2008 and sold out in 2012. In September 2020 it also became the largest shareholder in Gogo when it bought a 14.8% stake.
There is also a lot of serendipity about the JSSI deal. Book says they were not looking to sell and the transaction took six weeks from first meeting to close. Both GTCR and JSSI have Chicago headquarters – the two offices are just two blocks apart. Book has also been friends with Craig Bondy, MD at GTCR – who was involved in the Landmark and CAMP deals – since he came to Chicago to run JSSI.
“We have built a relationship with Neil over many years investing in the industry and have been extremely impressed with the business he has built and the team’s overall execution,” says Bondy.
On November 10th GTCR closed a new $7.5bn equity fund – upsized from $6.75bn – and has capital to deploy,
JSSI has more in common with CAMP than Landmark. Although it is best known for its hourly maintenance programmes – which now cover more than 2000 aircraft – and has a large technical team, it does not perform maintenance. In the past few years it has expanded significantly into: parts and engine leasing – it is tearing down one aircraft a month and has just started on its second GV; advisory – appraisals, inspections and maintenance planning; maintenance technology after buying Tracware; and information following its acquisition of Conklin & de Decker. The company has also successfully started supporting regional airlines.
GTCR gives JSSI cash to buy other companies. “We will continue to identify and pursue strategic acquisitions that are accretive to JSSI’s hourly maintenance programmes, JSSI parts and other areas of the business,” says Book. The company is also looking to invest in technology businesses.
GTCR is not the only investment firm targeting the sector. This week, Kenn Ricci’s SPAC (special-purpose acquisition company) successfully floated. Last month Global Jet Capital closed its cheapest, most oversubscribed securitisation. Stonebriar also had a great reception for an asset-backed bond in August.
One less obvious risk for investors is that they can also become trapped in the industry. “When we originally invested in JSSI it was just that: an investment,” says Book. “But when I become President eight years ago and got to meet the characters involved, I quickly realised that this is an industry I had no intention of leaving anytime soon.”