On the sidelines of the Aviation Suppliers Association's (ASA) annual conference in Las Vegas this month, a few parts distributor executives told me that they have been receiving partnership, joint venture and/or acquisition offers in the last several months. Some larger companies want to swoop in and take over the business, which for family-owned-and-operated companies, could be appealing—if they want out. Most people I talked to said 'no' to that option, because they want to retain their businesses but leverage the experience and assets of a bigger company—or an entity with deeper pockets—to expand.
Then there are partnerships and joint ventures. One parts supplier said the partnership route appeals to him because he could sample the other company, if you will, and test how the two mesh. He is hoping to gain additional business insights and ideas to insert new capabilities into his company.
Another parts distributor executive just left the family business to join a recently launched leasing and spares support enterprise. He will gain new skills and experience from working for an innovative start-up while his family will continue to run the parts business.
Just like gaining new professional skills, the capital sources available to the right aftermarket companies can open opportunities. Besides talking to people at the ASA conference, I've been receiving more phone calls lately asking if I know of solid repair shops, parts suppliers or niche service companies that could be acquired. Conversely, I've received inquiries from people seeking investors. While I do not play matchmaker, I find it illuminating to hear what capabilities people are considering.
I recently received a call asking if I thought it would be a good idea to open a VIP completion center to capitalize on the tight capacity situation. I asked what unique engineering/service functions the caller's entity could bring to this market. He didn't know. That's a bad bet.
But the potential for capital infusion allows companies to expand—often globally—or to bundle more services together, gain efficiencies, or, or, or. The list is long.
Consolidation in the aftermarket will continue for these reasons. (See Henry Canaday's coverage on the parts market starting on page MRO6.)
I am in awe of the innovative ideas from people in this business. The climate is ripe to try some of them. But be smart about it and don't create overcapacity. That does no one any good.
Ideally, family businesses are listening to the ideas from younger family members. But are these businesses fully leveraging the energy and talents of the younger generations? This can include encouraging a career path that allows the up-and-comers to leave and return to the fold at a later date—smarter and boasting solid skill sets and connections.
I expect to see a lot of very creative solutions coming to the market soon—especially ones that mine aftermarket data for reliability, performance and cost-saving improvements.
What are you doing to make your business smarter?