“The CEO Deal Incubator”™
Ranger Partners is a private equity firm established to create, finance, and manage leveraged buyouts and MBO's (management buyouts), and provide expansion capital for U.S. based companies in a range of sectors of the huge aerospace & aviation industries and the trades and technologies that support those large industrial segments. We are experts in the field, long-serving veterans in those industries. The Partners on our team have successfully established business platforms or managed companies in sectors such as FBO's, heavy commercial MRO, helicopter fleet operations, airfield services, cargo handling, airlines fueling, airport fuel farms management, logistics services, government outsourcing, military aircraft retrofits, rotorcraft technical services, completions and avionics, specialty PMA manufacturing, turbine engine overhaul, parts aftermarket services, engineering, and aviation facilities construction. Our impressive array of Adjunct Partners and Advisory Board Members round out the Group's skills set, covering just about every aspect of the aerospace and aviation industries, and every one of us has long, deep experience. There are no "trainees" here. As you will see from the information presented here, we specialize in originating both large-scale projects and smaller business ventures, with the common threads being sustainable historical cash flow and better than average growth. The ventures we invest in and bring to market provide substantial opportunity for:
- Institutional investors, who can realize significant returns upon the successful execution of the business plan;
- Lenders, who can achieve relatively high returns on capital at manageable risk levels;
- Sellers, who by using our portfolio company as an exit vehicle can: (i) realize immediate liquidity and (ii) through ownership of the new company’s equity, capture incremental value as the venture grows and achieves economies of scale; and
- Customers, who can take advantage of our portfolio company’s size, scope and financial strength to consolidate more of their requirements with one provider to enhance the level of service to their customers and therefore their own profitability;
- Management partners, who can accelerate their own career ambitions by joining us and out institutional investors as owners of the company they wish to acquire
- Suppliers and OEM’s, who suddenly find that better capitalized service companies are capable of buying more, consolidating their investment power, and providing a higher level of performance, and
- Employees, who have in our past ventures enjoyed better career opportunities in a larger enterprise, along with better benefits, new 401-k Plans, improved bonus opportunities, and stock options for key leaders
Ranger Partners was originally founded on September 1, 1988 as a sole proprietorship, and has grown as a unique enterprise over the years with multiple partners and numerous ventures. In 1997, we geared up our business model to include taking on large institutional investors, and since that time we have completed a number of well publicized aerospace and aviation transactions. Our total transaction record of buying, selling, and internal investing since 1997 amounts to a total ebb and flow of all forms of capital in excess of $385 Million.
Our proprietary approach toward partnering with CEO’s and Management Buyout Teams is called “The CEO Deal Incubator”™.
“The CEO Deal Incubator”™
Business incubators are programs designed to accelerate the successful development of entrepreneurial companies through an array of business support resources and services, developed and orchestrated by incubator management and offered both in the incubator and through its network of contacts. Incubators vary in the way they deliver their services, in their organizational structure, and in the types of clients they serve. Successful completion of a business incubation program increases the likelihood that a start-up company will stay in business for the long term: Historically, 87% of incubator graduates stay in business. In the aerospace industry context, "most deals fail to get done.” That's where we can help. We can help an ambitious CEO translate decades of experience into a successfully launched merger or acquisition. Entrepreneurs who wish to enter our CEO deal incubation program must contact us with a Proposal. Acceptance criteria vary from person to person, deal to deal, but in general only those with feasible business ideas, a starting deal, a great track record, and a workable business plan are engaged. CEO's are customarily also asked to co-invest a meaningful amount of their personal discretionary savings in the first platform acquisition, and to invest further in each follow-on capital call with the institutional investors. We can show CEO's and their teams inventive ways to make this happen.
Ranger Partners has successfully built companies in partnership with numerous institutional investors and lenders since 1997. Prior to that, our Partners were successfully engaged as officers and leaders in a variety of aerospace, aviation, electronics, defense, rotorcraft, and financial enterprises.
Ranger Partners’ business model is unique, refined by our firm’s principals over the past decade, to develop highly profitable businesses in a range of aerospace and aviation settings. We work to generate better than average returns for our investors utilizing a disciplined investment model that requires Ranger’s business ventures to adhere to a carefully prepared multi-year Business Plan. Our typical investment criteria are designed to maximize the opportunity for upside value creation, and minimize or isolate potential risks. Those criteria are outlined below. Often these businesses are built through the consolidation of entrepreneurial companies where the combined entities have unique competitive advantages for growth through scale or strategic positioning.
Our business model appeals to a broad range of investors. We have partnered with large institutional equity and mezzanine funds seeking qualified investment opportunities requiring $10 - $100 million of initial and follow-on capital for management and leveraged buyouts, as well as with smaller venture capital firms looking to participate in the lucrative initiation of buildups and consolidations. We make an excellent vehicle for large or small Limited Partners who wish to participate in the favorable trends of our served industries, without the management chores that go with value creation efforts in operating companies. Ranger Partners’ approach provides a unique opportunity for investors to realize higher returns on their invested capital with less risk, relying on our extensive research, transaction formulation, due diligence and on-going management participation in the portfolio company. Our business model, which is focused solely in the industries where we have deep expertise, is substantially different from other investment vehicles, and features several key advantages that yield meaningful tangible benefits for investors, including:
- “The CEO Deal Incubator”™ - We can actually offer a place for a Partner CEO to “hang his hat,” although in many ways we are an “Incubator Without Walls.” We can provide the infrastructure, staff support, deal support, market research, legal counsel, outside accounting & auditing, due diligence, financial modeling and packaging, investor relations, merger & acquisition advisory services, and crucial capital-raising and deal promotion that many deal-seeking CEO’s do not have the experience for. We take most of that off the CEO’s list of things to worry about as he prosecutes the initial platform deal at the start of an acquisitive consolidation. We have been down this road many times before, we know the ropes. We help the CEO and his team avoid the pitfalls, and even help them achieve an optimal set of management Terms from investors and lenders. When Ranger brings a deal to market, we get a wide audience of people who know that we are backing a deal and a CEO that we believe in. We only accept a few of these engagements with CEO’s, so we are very selective before we commit time, staff resources, and money.
- Ranger Originated Deals and Diligence Management—We originate all the transactions we bring to market. Our team of professionals research and identify attractive industry sectors, recruit qualified CEOs who participate as co-founders, and locate platform companies to initiate the investment opportunity. This provides our Management Investor Partners with better economics, often participating as the “first money in”, which usually yields higher returns. And, until financing commitments are in place, Ranger Partners bears most of the risk for broken deal costs if an initial platform transaction is not consummated. We manage the complicated front end of the buyout process, working through legal, accounting, environmental, engineering, and diligence firms who understand our business model, and are willing to take some degree of front end risk with us, in exchange for winning the long term account for a particular consolidation.
- Ongoing Management Role in Portfolio Companies—Consistent with our position as a co-founder and co-investor with the CEO, we maintain an ongoing role with the portfolio company as part of the management and/or governance team, leading the corporate development and capital formation activities. We deploy our experienced team of professionals to fulfill this role, leveraging our extensive network of investors and lenders, and thereby free the CEO and his small operating team to focus on operational concerns and integration challenges. We know what it takes to realize successful build-ups and consolidations and through our involvement we mitigate our institutional investors’ risk by constantly evaluating critical success factors – systems, integration, capital expenditures, management metrics, business plans, among many others – ensuring that adequate resources are skillfully committed, and results are moving ahead briskly. While the CEO and the operational team are busy with day to day functions, we have also proven ourselves repeatedly with deal flow creation and deal prosecution, post-merger integration systems improvements, and facility construction and sale-leaseback maneuvers to enhance the ultimate strategic exit value.
- OEM and Prime Partnering – Over the years, we have become quite adept at leveraging the growth of our portfolio companies via coat-tailing and partnering with major customers, prime contractors, and OEM’s. In so doing, we accelerate the portfolio company’s ability to grow, giving it new channels, new investment opportunities, and new exit paths for eventual liquidity. So far in each our successful, well publicized exits, we have sold to much larger entities such as giant conglomerate sized competitors or Fortune 100 OEM’s and Customers. We believe that the strongest exit valuation is achieved by building up a series of middle market enterprises to the point that they have critical mass, attractive as a “Strategic Business Unit” to a larger acquirer. We pay relatively modest multiples – but fair prices – for the portfolio companies that we acquire. But with several years’ worth of “Good To Great” enhancement and transformation techniques, consistently and relentlessly applied, we know that the value equation leverages steadily upward. We always seek to achieve a strategic premium at exit, yet give the ultimate buyer a well managed bargain at the same time, a true win-win outcome for everybody involved.
- Our Trademark Approach toward Promotion and Growth coupled to Operational Disciplines. Each of our major ventures since1997 has been a Ranger-branded company. We have had remarkable success in extending and amplifying the Ranger brand equity. Our key brand features are trademarked worldwide, and we invest periodically to maintain and enhance those trademarks and our brand momentum. Our Public Relations and Marketing programs have had consistently dramatic effects on our portfolio companies. Our “Monthly Ops Reviews” are literally a signature piece, applauded by stockholders and bankers alike. Ranger’s meticulous approach toward metrics, dashboards, and TQM has become a true hallmark of our operating style. For example, we transformed the 7 disparate units of Aircraft Service Intl, Inc., into the single unified global brand of “Aircraft Service International Group” (ASIG), which today has over 8,000 professionals at 100 major airports in North America, Latin America, Europe, and the Far East. ASIG achieved “best in world” rankings under Ranger’s tutelage. Another example is Keystone Helicopter, which tripled in size and profits under Ranger, and became the largest and best helicopter service center on the entire Eastern Seaboard. We have demonstrated an uncanny, savvy knack for artful promotion, fierce operational disciplines, and marketing impetus.
Ranger-branded enterprises, past or present, include:
- Ranger Aerospace Corp – airfield services, fueling, fuel farms, airlines support, cargo handling, terminal operations
- ASIG Ltd Europe
- Elsinore Aviation
- Keystone Ranger Holdings – Keystone Helicopter Corp
- Ranger Aerospace & Aeronautics – Three rotorcraft acquisitions consolidated to a huge depot operation in Texas
- Ranger Realty Holdings – Financing, design, and construction of the enormous Keystone “HeliPlex”
- Ranger Composites – Separate investment in Composite technology Inc, the world’s largest independent composites overhauler of its type
- Ranger Logistics – Logistics services and cargo services consolidation enterprise
- Ranger HeliCapital – joint venture for the acquisition, refurbishment, and re-sale of used helicopters, or new production slots with OEM’s
- Ranger International Group – US Government outsourcing and other specialty services with unique niches, in some cases classified
- Ranger Partners Group – Multi-faceted consulting, deal-making, and private equity firm, teaming with CEO’s and institutional shareholders to buy and transform companies
- Others contemplated, in which we are seeking CEO’s and platform companies, include but are not limited to:
- Ranger AeroSystems, launched in 2014 for deals in three sub-segments of the industry
- Ranger Precision
- Ranger Advanced Materials
- Ranger Airport Services
- Ranger GSE
- Ranger AeroParts
- Ranger Avionics & Instruments
- Ranger AeroDesign (engineering)
- Ranger TQM & Training
- Ranger AeroLeasing
- Ranger Staffing & Search Services
Successful execution of the Ranger Partners business model relies on thorough analysis and evaluation of both industry and target company dynamics, and adherence to a disciplined set of investment criteria, including:
- Proven CEO. Management talent is the most critical element of success for our portfolio investments. Our strategy is simple, it is “CEO Centric.” We seek out experienced and motivated individuals to form the management team for a specific sector investment. It is particularly important that a qualified CEO be identified early in the process – one with extensive industry experience and contacts, a successful track record of growth and experience with acquisitions and integration. In a few cases, a candidate may be found within the initial acquisition that serves as the “platform” company for the venture. The CEO ultimately becomes a co-founder of the newly created business with Ranger Partners.
- Fragmented sub-sector of Aerospace, Aviation, or Related Trades. Aside from the airlines themselves, the total aerospace and aviation industry represents nearly $200 Billion per year of ever-evolving economic and technological growth. There are roughly 25,000 middle-market companies in this industry, most of which are small and privately held. One end of the industry is fragmenting while the other end is consolidating, and periodically those poles reverse. As such, we are in a permanently target rich environment when it comes to acquisitions and consolidations, and there will always be "larger fish” up the food chain seeking to consume the matured, valuable deals that we create. While the optimal size and extent of fragmentation for an aerospace industry sector vary greatly, in general those whose total market size exceeds $5 billion and have many hundreds of corporate participants are most desirable. While we will not adhere to strict size guidelines, Companies with sales revenue in the $10 to $50 million range or greater are most desirable based on Ranger Partners experience that smaller transactions generally require the same level of effort to consummate. For an initial platform deal, we usually prefer Sustainable Adjusted EBITDA to be at or above $5 Million.
- Market and Platform Growth. We don’t want stagnant companies or slow moving investments. Market growth and competitive speed are critical success factors in our book. Ideally, the industry segment should have experienced growth at twice the rate of the GDP for at least five years. With this level of growth, it is likely that new companies will have entered the segment, adding to the level of fragmentation and increasing the number of companies available for sale. As for the internal growth rates of specific companies, those that exceed the industry growth rate are obviously most desirable. In the context of a consolidation, higher growth companies generally exhibit unique market attributes – a local or regional market leader, a unique product or service, a higher quality brand, a more innovative delivery mechanism – a company whose value may be exponential in that it provides the business with an edge to be applied in different geographic markets, which can be pursued by leveraging the capital of our investors.
- Target Companies Have Leverageable Cash Flow. The availability of significant excess cash flow is a critical element of any successful investment. That helps us intelligently price and structure our portfolio investments. By design, the value of equity investments made by our firm and its institutional investors is maximized through the prudent use of leverage. Excess cash flow is necessary to service bank and seller debt, for internal capital spending and growth investments, to finance corporate development activity (legal fees, travel to strategic partners, customers and acquisition targets, due diligence, accounting audits, and broker fees) and to provide management with an adequate cushion for mistakes and missteps. Ranger Partners uses senior and mezzanine credit facilities as components of the capital structure. The challenge we face when implementing our leverage strategy is to utilize the proper mix of debt and equity in the capital structure of our acquisitions while maintaining adequate cushion for debt service and maximum returns for investors.
- Transaction Pricing at Discounts to Public Comparable’s. We simply do not over-pay, nor do we recommend it for anybody else. When a transaction is overpriced, the seller may be happy, but nobody else is, and if the seller carries part of the deal, he joins the pain eventually also. We pay strict attention to valuation multiples, and ours are rarely the highest that a seller could possibly attain. We tell sellers quite often that if they simply want maximum price, run a full-tilt auction, and we’ll recommend some of the best investment bankers in the aerospace industry to help them. But that can be very grueling and unsettling for a company and its employees and customers. We generally advocate paying a fair price, with the seller participating with us going forward, so that he might earn a “second payday” alongside us and the larger investors. Ranger Partners values the equity of target acquisitions in its consolidations based upon a multiple of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) also referred to as free cash flow. Investments in or acquisitions of private companies should generally be made at multiples of earnings which are substantially less than those of public companies, typically at least a 25% to 45% discount to the public rates. The greater the multiple spread, the greater the opportunity for our returns and those of our partners upon a liquidity event. To establish suitable pricing, we develop and maintain statistics on comparable public companies with businesses closely aligned to that of the venture. Discounts are applied to the comparable public multiple to account for liquidity, risk and size. The more free cash flow and the more mature the portfolio company, the less discount is applied. Most of our ventures have been initially priced in the 4X to 6X EBITDA range, and there are variations in both directions based on particular circumstances.
- Competitive Advantages to Accelerate Growth. “Transformation Benefits” in a leveraged growth strategy include cost efficiencies, sales and marketing synergies, and contracting opportunities – benefits that make the total enterprise worth more than the sum of the pieces. We require that each venture has compelling Transformation Benefits – they form the basis of the investment thesis – they must be realistic, quantifiable and measurable. Cost efficiencies, the basic building blocks of the venture, include eliminating excess costs (legal, accounting, tax, human resources etc.), deploying state of the art information systems, optimizing cash management, reducing insurance costs, and implementing corporate financial reporting. Cost efficiencies should be planned prior to the consummation of transactions and monitored on an ongoing basis to ensure maximum benefit to the venture. Sales and marketing synergies are realized through cooperative venturing among acquired entities and leveraging access to customers and strategic business partners. Joint sales programs (cross selling), regional or national programs for telemarketing and sales lead referrals, sales training programs, branding programs that maintain the local or regional brand and strategically leverage the new parent company, all facilitate new revenue growth. Strategic business partners associated with the portfolio companies such as investment banking contacts and industry consultants can be introduced to other acquired entities to open new markets and access new clients. Contracting opportunities result from the buying power and critical mass of a larger more robust company. Economies of scale provide buying power that enables volume discounted purchasing, while critical mass enables volume discounted sales. While all of these Transformation Benefits are important, sales and marketing synergies and contracting opportunities generally create the most value from an equity perspective. The more these types of benefits are derived the greater the enterprise value of the consolidation. We encourage and help to achieve robust, accelerated growth.
Ranger Partners’ management team generally spends up to six months, researching and analyzing a target company's suitability for a platform investment. For the firm to commit to pursuing a project requires: (i) a qualified CEO with a proven track record; (ii) market research which confirms that the industry sector characteristics support the consolidation; (iii) a complete business plan championed by the CEO and at least one of our own Partners, with a detailed financial model that demonstrates the return targets to be expected from the venture; (iv) specific validation of pricing assumptions and strategic approach through Expressions of Interest or full Letters of Intent with potential sellers; and (v) unanimous approval by our Managing Partners. Once a project has been approved, we establish a team headed by a Partner who initiates the implementation process for the venture with the CEO of the newly created company. The process generally proceeds as follows:
1. Corporate Organization & Equity Investment by Partner Funds: Corporate formation and the initial equity investment by Ranger Partners and our CEO Partners take place concurrently at the first Closing alongside our Institutional Investors. Once a transaction with a signed Letter of Intent has satisfactorily passed due diligence testing, the closing process is generally initiated by forming a corporation that will serve as the holding company for the venture. Generally, a Delaware C-corporation, or an LLC is formed, based upon agreements reached during the transaction approval process. Founders stock is issued to the management team (including the CEO and Ranger Partners for their role as founders) representing up to 15% to 20% of the equity with the balance of the ownership issued to our equity partners (and Ranger Partners) in exchange for typical private equity securities based on capital invested. Ranger Partners always seeks to reserve the right to invest parri-passu, in some cases heavily, alongside the larger institutional investors. (Subsequent to closing the initial transaction, an employee stock option plan is adopted, generally representing 5% to 10% of the fully diluted ownership of the company, to provide incentives for the balance of the management team, apart from the Founder CEO and any others who may be part of the Founders Team.)
The equity investment may take the form of: (i) convertible preferred stock; or (ii) common stock along with redeemable preferred stock. The proceeds of this financing are used to purchase the target company (or companies), which in the case of a consolidation opportunity serve as the platform operation. The acquisition of the platform company is also financed with senior debt and subordinated debt. The blend of equity capital, mezzanine funding, and bank debt is designed to give the company good operating ratios, while yielding the investors superior investment returns especially IRR on the equity itself. We customarily tie the "Up's" to Ranger Partners and the Founder CEO to a goal in the Business Plan of a Three Times Cash on Cash Return, and/or IRR and ROIC percentage goals. Once the initial capital plus a Preferred PIK Dividend have been returned, Management and Ranger Partners earn their portions of the "Up's." In some cases, Ranger has successfully negotiated larger Up's with institutional investors, based on higher levels of gain-sharing with Management and Ranger, as the ultimate investment returns rise. Once past the 3x Cash Return, or an IRR threshold (or both), then the Management participation can rightfully increase, so long as the Investors' gains keep rising as well. We call this the "Home Run Pool," in which the investors always gain the most, but Management can possibly be very richly rewarded with increments. Truly a win-win approach, aligning all interests toward the common goal of improving shareholder returns.
2. Secondary Rounds of Financing's, Acquisitions and Outside Equity Investment: Ranger Partners, under terms of a market priced advisory agreement, continues to manage the corporate development and capital formation activity on behalf of the portfolio company. Key areas supervised by Ranger Partners included deal origination and structuring, proforma cash flow forecasting and modeling, acquisition due diligence, and covenant compliance. As additional equity is required, current shareholders are solicited for interest in investing additional capital or other private equity partners are brought into the venture. Sufficient equity is invested to maintain the appropriate balance between equity and debt necessary to establish prudent financial leverage.
|What To Do Next: If you are a CEO or senior Officer with a well defined track record of success, and you are ready to take that next step of launching your own deal, we suggest that you should not do it alone. Yes, we command fees and equity for our proven services, but we believe we earn our way as we go. The results of what we have done so far speak for themselves. Contact us and let’s see if there is something we can launch together.