SR Technics flies into a new era
During a turbulent period for the aviation industry, 3i and SR Technics showed how clear vision and strong leadership can deliver successful acquisitions, major new contracts and rapid, profitable growth.
Today, SR Technics (SRT) is a world-leading independent provider of technical services to commercial aircraft. If you fly on an Airbus or Boeing plane, there’s a good chance that it’s been maintained and serviced by SRT. The company’s 5,000 employees serve over 500 customers around the world – handling 750 aircraft, 300 engines and 78,000 components every year. This pre-eminent position is the result of a four-year journey that led to 3i’s €1bn sale of SRT in 2006.
Sharing a new vision
Formerly a subsidiary of Swissair, the national carrier of Switzerland which collapsed in October 2001, SRT came up for sale in 2002. 3i’s buyout team decided to place a bid, recognising the company’s strong brand and excellent management. Already seen as a world leader in repairing and maintaining Airbus fleets, 3i believed that SRT could be developed further through organic growth and acquisitions. When 3i shared its vision with the board, 3i’s business and industry understanding enabled the buyout team to secure the much-sought-after deal. Burkhard Brinkmann, 3i Director in Frankfurt and board member of SRT throughout 3i’s ownership, explains: “We brought together partners from across Europe to handle the negotiations. The final team included David Osborne, Stuart McMinnies, Alex Williams, Michael Petersen and industry advisor Jean-Eric Petit. Jean-Eric used to work for Air France Industries and his presence in the negotiations showed the management team that we had the right in-house expertise.” The team further boosted its credibility by identifying the right person to chair SRT. Frank Turner, the former CEO of Rolls Royce’s aero engine division, is a recognised expert in the aviation industry and his vast experience and network has been of great value throughout the process.
Building new capabilities and customers
At the time of the deal, SWISS (the successor airline to Swissair) remained SRT’s main customer, accounting for 45% of turnover. For management and 3i it was clear that SRT needed to widen its customer base, so they drew up a list of potential acquisitions. Top of the list was FLS Aerospace, a leading independent provider of technical solutions for Boeing aircraft. Brinkmann explains: “When we acquired FLS, it had never made a profit in its history. We were convinced that it could be made profitable within a year, as we believed that it had a good team that had been held back by the previous owners. It was hard to persuade others of this, but it worked.” 3i led the negotiations with the FLS board and carried out the due diligence. Once the deal had been completed, management implemented a 100-day plan that successfully integrated FLS into SRT. The acquisition of FLS gave SRT the capacity to provide technical support to both Boeing and Airbus. This was an important factor in winning a €900m contract with Easyjet, which operates a mixed fleet. 3i was able to support the negotiations because it already had a relationship with Easyjet, following the sale of budget airline Go in 2000.
Succeeding in challenging times
Successful organic growth enabled SRT to expand its customer base and reduce its reliance on SWISS. By the time 3i sold its stake in SRT, the company’s growth rates were twice the industry average and the SWISS contract accounted for only 14% of revenue. SRT’s achievement was all the more exceptional given the disruption to the air industry caused by a series of events that included the aftermath of 9/11, the SARS crisis in Asia, the Iraq War and the downsizing and ownership change of SWISS. Following a successful four year partnership, management and 3i agreed that it was the right time to realise the value created and initiated a full dual track IPO and M&A exit process in early 2006. A consortium of investors based in the United Arab Emirates, consisting of Mubadala (Abu Dhabi), Dubai Aerospace and Istithmar (both Dubai) won the race and the parties signed the deal on 7 September 2006, leading to a €1bn sale in which 3i achieved an IRR of 50% and a money multiple of 4.5x. “During the past four years, 3i has supported SRT’s exceptional transformation into a leading global and independent company,” said Hans Lerch, CEO, SRT. “The sale is a unique opportunity to further boost our growth strategy.”
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