Hartford Business Journal

20 HARTFORDBUSINESS.COM | FEBRUARY 5, 2024 Kaman CEO and Chairman Ian Walsh has been leading the Bloomfield-based aerospace manufacturer through a five-year restructuring, including a pending $1.8 billion buyout by a private equity investor. HBJ PHOTO | STEVE LASCHEVER Taking Flight $1.8B Kaman Corp. deal reflects private equity's growing interest in CT manufacturers in its deal last year. Private equity firms are sitting on more than $850 billion in capital they're looking to deploy, Goodrich said, "so demand for great companies will abso- lutely continue for a long, long time." However, the last 18 months have been challenging as rising interest rates have eaten into company cash flows and caused banks and other lenders to tighten credit availability. "We are seeing that banks are starting to lend again, so that is a great sign — both for M&A markets and for operating companies looking for growth," Goodrich said. Paul Lavoie, Connecticut's chief manufacturing officer, said anecdotally he's heard firsthand from private equity firms interested in getting into Connecticut's manufac- turing market if opportunities arise. He pointed to another recent deal: The acquisition of Connecticut manufac- turers Whitcraft Group and Paradigm Preci- sion by private equity firms Clayton, Dubilier & Rice and Greenbriar Equity Group. Whitcraft and Para- digm have since combined into a new company, Pursuit Aerospace. Lavoie said these deals make sense because the aerospace and defense industry is capital intensive and the back-office func- tions at smaller manufacturers are duplicative. "So, if I can take three or four companies and roll them up into one back office, but still have the manu- facturing facilities, it frees up a lot of cash to invest in those facilities," Lavoie said. DiPentima said private equity firms offer publicly traded companies faster growth opportunities because they have fewer obligations and less strict guidelines for federal compliance, accounting and reporting. "You often see that with private equity, the growth can happen quicker, and you could just be a little bit more nimble to pivot should an opportunity develop, or a headwind develop down the road," DiPentima said. "When you're not a publicly traded company, you don't have to worry as much about the inves- tor-shareholder return as you do about just getting the growth that private equity likes to see." Goodrich said many private equity funds traditionally deliver better returns that outperform the stock market. "As a result, institutional investors continue to fund these private equity funds with more and more capital," he said. Kaman moving forward Kaman Corp. was founded in 1945 by aeronautical engineer, busi- ness executive and philanthropist Charles H. Kaman, who pioneered rotary-winged flight. The company has gone through many changes throughout its history, including, By Skyler Frazer sfrazer@hartfordbusiness.com C onnecticut manufacturers have become hot targets for one of the most aggressive capital investors in recent years: private equity firms. The latest and most high-profile example is Nashville, Tennes- see-based private equity firm Arcline Investment Management L.P. announcing plans to acquire publicly traded Bloomfield aerospace and defense manufacturer Kaman Corp. for $1.8 billion. The deal, which still requires share- holder and regulatory approvals, comes as Kaman has been under- going a major restructuring to focus on new products, like its unmanned aerial vehicle technology, and away from its long-established joint fuze program it supported through U.S. military contracts. Other Connecticut manufacturers have also been targeted by private equity investors in the past year. Waterbury contract manufacturer GEM Manufacturing, which serves the aerospace and other industries, was acquired in February 2023 by Chicago-based CORE Industrial Partners. A few months later, GEM, backed by Core Industrial, acquired two New Jersey companies that produce complex precision compo- nents for the aerospace, defense and other industries. In March, Oxford chemicals manufacturer Catachem Inc. was acquired by Dallas private equity firm Generational Equity. In January, Bristol-based Barnes Group said it agreed to sell two of its business units for $175 million to private equity firm One Equity Partners. According to accounting and advisory firm KPMG's "Aerospace & Defense M&A 2023" report, private equity investors have "dominated" the buy-side of aerospace and defense deals since the pandemic. Private equity buyers accounted for 41.7% of merger-and-acquisition activity in the defense and aero- space industries from 2020 to 2022, according to the report, up from 33.5% between 2013 and 2019. "There's been a lot of private equity acquiring mid- and larger-size companies here in the state — manu- facturing primarily," said Connecticut Business & Industry Association President & CEO Chris DiPentima, who is a former manufacturing exec- utive. "There continues to be a lot of interest from private equity as well as strategic buyers, because the manufacturers we have in the state are true gems at the global level." $850B in capital Private equity firms are always searching for middle-market compa- nies that have strong financials, dedicated management and great growth prospects, said Ramsey W. Goodrich, managing partner of Southport investment banking firm Carter Morse & Goodrich, whose firm represented Gem Manufacturing Paul S. Lavoie Chris DiPentima Ramsey Goodrich

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