Acquisitions Anonymous - #1 for business buying, selling and operating - 8M Aerospace Deal… 95% Customer Concentration. Buy or Run?

Episode Date: April 3, 2026

In this episode the hosts evaluate a niche aerospace and military parts distributor earning $1.9M EBITDA, debating whether its high margins and sticky customers outweigh the risks of extreme customer concentration and geopolitical exposure.Business Listing – https://mail.mixmax.com/m/xi0KeLAu5yQZPLwgcWelcome to Acquisitions Anonymous – the #1 podcast for small business M&A. Every week, we break down businesses for sale and talk about buying, operating, and growing them.Looking to build a professional website in minutes? Try Wix: https://wix.pxf.io/c/6898629/3115214/25616?trafcat=templateHubSpot is the backbone for how businesses scale without chaos. Try them out here: https://go.try-hubspot.com/OeG9Vr💰 Sponsored by:HighLevelHighLevel is an all-in-one CRM platform designed for small businesses that want to manage email, SMS campaigns, funnels, and customer relationships in one place. Think of it as the Swiss Army knife for operations and marketing—helping owners automate follow-ups, streamline communications, and scale growth without juggling multiple tools. Automate, manage, and grow your business at https://www.gohighlevel.comViso Business CapitalViso Business Capital helps buyers secure the right SBA loan structure by working with over 30 lenders to find the best rate and fastest path to closing. Whether you're a first-time buyer or experienced operator, their team helps you navigate financing complexity so you can focus on winning the deal. Sign up for a free live Q&A on SBA loans at https://www.visocap.netThis episode features a specialized aerospace and defense parts distributor generating $8.2M in revenue and approximately $1.9M in adjusted EBITDA, with an asking price of about 4.2x earnings. The company focuses exclusively on exporting U.S.-manufactured military-grade components—such as connectors, switches, and precision hardware—to international defense and aerospace customers. Its lean operating model and compliance infrastructure allow it to maintain unusually high margins for a distributor, approaching 25%.Key Highlights :- $8.2M revenue, $1.9M EBITDA, asking roughly 4.2x multiple- 95% of revenue from five customers—extreme but typical concentration in defense supply chains- High-margin niche distribution business with strong compliance and export capabilities- Significant working capital and inventory requirements likely needed at closing- Growth depends on expanding into new countries or defense programsSubscribe to  weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking hereDo you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel.Do you enjoy our content? Rate our show!Follow us on Twitter @acquanon Learnings about small business acquisitions and operations.For inquiries or suggestions, email us at [e-mail]

Welcome to Acquisitions Anonymous. The internet's number one podcast for business buyers and business nerds. I am one of your co-host, Michael Girdley. Thanks for being here. Today, Heather and I welcomed back, Brian, who is a searcher as a guest to the pod. He actually has an aerospace background. So we did an aerospace deal, and he liked it enough that he decided to take some action on it. So stick around for the entire episode to find out what we thought about it at the end. Otherwise, here it is. Hope you enjoy it. Hello, another episode of Acquisitions Anonymous. We don't have 100% beers anymore. And thumbs downing on just the plus inventory line. Big thanks to High Level for sponsoring this video and helping us pay for our editors. High Level is the all-in-one CRM that handles your emails, text, funnels, and more all-in-one place. Think of it like the Swiss Army knife for small businesses, and you can try it for free for 30 days at gohighlevel.com slash Michael Gurdley.

Brian, welcome back. Do you want to give us a quick overview of your... and you're going to talk to us today about, well, this deal that I brought. Yes. All right. So I'm back again. I'm excited to be here just as much as I was the last episode. I am a searcher looking to acquire a company. I spend most of my time talking to owners, looking at Sims. So I thought it would be a natural fit to come in here and do it out with you guys. Yeah. So tell us more about being in New Orleans. So you're working with a financial sponsor. We're not using the search fund word. We'll call it search fund, no deed. So how did, you know, why do that?

How did that all come together? Yeah. So I was definitely looking to partner with a financial sponsor and doing this, given that I have more of an operations background, not much M&A. And so I looked at the different options. For a while I was going down the traditional path. I actually ran into Timothy Beauvard, who's sort of the managing partner of the fund backing me at a conference somewhere.

And he just kind of was talking about all the ways that it really behoves someone like B to have like one sort of, like, like conversations, a learning, like a clear, like methodology of what the investors are looking for and constant communication in order to get up the learning curve fast when the market is as crowded as it is right now. So that resonated with me. I went through their process and it ended up working out. So how does that work? Like is there a pre-determined, let's say you get a deal put together or you find a deal. Are the terms already set of how they're going to invest and who's doing what? How's all that working for you? Yeah. So it's essentially there are some like

guidelines of like how much debt they'd usually like to put in. And we do do commercial debt and not SBA. So that's kind of a guideline. There's a guideline on wanting to get at least some portion of seller note in there. But in terms of the valuation, in terms of my modeling, structure and those kinds of things, I basically put it together deal by deal. You just have ongoing discussions with them. Every week we have a conversation to talk about my pipeline, to talk about 19. I think it's interesting. And then we have sort of checkpoints of, okay, we want to have this meeting like pre-I-O-I-I was going to be. Why do anybody have questions, risks, or anything like that? Similarly, when we get further along to the LOI. So it's not really like a

committee. It's kind of just a conversation. Yeah, but so let's say you get close to the finish line, like, how do you know if you're going to own 10% of the business or 40% of the business or is there ratcheting equity? Is that all set up beforehand or is it set up deal by deal? No, it's all set up beforehand. So it's similar to if anyone's familiar with like the traditional search model where you can get up to 25% ownership once you do three hurdles. So one at close, you get eight in a third after you've ran the company for four years. Or if you exit before that, you get another eight in a third. And then if you hit the 30%, 35% IRR hurdle for the company, you get another eight and a third. That gets you the 25%. Got it. Okay. And how big could it go?

How big of a deal could you do? It kind of depends. I mean, there's flexibility. You know, they're raising a bigger fund that they have in the past. So typically we would try to stick between $1.5 million and adjust at EBITA up to three and a half or four in EBITA. But there is some leeway to stretch up to five, six million in EBITAN in EBITA. And given the investor appetite. Nice. Heather, do you have any questions?

Otherwise, I have one more. No, and I've worked with when I was at Live Oak Bank. I actually worked with these traditional search fund deals with. that did not use SBA financing. So it's all pretty familiar to me. And you're with a great group, Brian. Great team they have there. Amazing.

How big is their fund? I think they have 300 million assets under management right now, inclusive of the porcos. Yeah. That's EV total or that's just like cash that they have under the L? There's EV total. Yeah. Yeah.

Okay. So with seller node and banked and stuff. Okay. So that means they're probably like a 50 to 75 million dollar fund under across all of them. Gotcha. Perfect. I had a dream last night. I woke up and I was, you know, this is the kind of dreams I have. And I had a nightmare that I became a VC. And then 10 years into becoming a BC, I realized that the role management fees happen when you run a hedge fund. Like the hedge funds

are all these billion dollar funds. You're making 2% on that. And BCs are raising these, you know, $50 million funds grinding it out for a million a year in fees plus expenses. And that was my nightmare. So that's how my life went last night. You're welcome. Yeah, I don't know if you want to do that or you might lose the side pieces of hair you still have. I was a VC for a while. I'm still working on one of those funds 15 years later. So it's fascinating to watch in that situation, watch the power law distribution of VC happen. You know, for that particular fund, there is one company that is going to be three to five times our original fund. Everything else is noise. Like, it's just totally fascinating to watch the math

happen in practice. On that note, let me pitch you this aerospace deal. So this caught my eye. It showed up, I forgot which site sent me this, business exits sent me this. And it came to me in being very interesting because it is a specialized

military and aerospace parts distributor. So revenue in 2025 was 8.2 million and profit was 1.9 million. So they operate at, looks like, just shy of 25% profit margin? Is that my math right there, Heather?

I don't know. I have to get my calculator out. We usually ask Bill, Bill GPT. Yeah, Bill, we can do it in his head. And then they have a picture of what looks like, Brian, are these familiar to you? You're the aerospace guy. I mean, looks like they got some avionics equipment in there.

And like a raspberry pie. I was like, what does that have? too, but anyway. Pre-cooked. Just the ingredients. So profit is 1.9 million. They're asking 4.2 times that, $8 million, and it says it's a distributor. So they show us historical financials and adjusted EBITA, which is interesting. So up here it says profit, but down here it says the 1.9 million has adjusted EBITA. So in terms of being internally inconsistent, we are off to a bad start. It says, says not SBA eligible, which is two strikes against this, Heather. Yeah, this is no fun.

Who chose this? Who chose this? Correct. All right. So revenue in 2023 was $8.3 million. 2024 was $8.8 million. In 2025, it was $8.2 million. Profit was pretty steady. Or adjusted EBITO was pretty steady.

I'm sorry, $1.9 million, $2.1.9 million. So pretty consistent. Description is established in the mid-1990s, this U.S.-based export distributor, specializes in high-quality military-spec aerospace and defense components. The company sources and supply specialized electromechanical parts, including connectors, relay, switches, and precision hardware to international aerospace and defense manufacturers. The business operates under a lean model

and is distinguished by its exclusive export focus, strong compliance infrastructure, and long-standing relationships of mission-critical customers and highly regulated industries. They have a concentrated base of large international aerospace and defense manufacturers, approximately 95% of revenue is generated from five customers. I'll pause there. Heather, I think in nearly 500 episodes,

this is the first time that somebody has listed customer concentration as a feature. Well, this is the kind of business where it's hard not to have a concentration, I think. You know, you're talking about the government and big airlines. Those are their customers. And I guess it's refreshing that they're just going straightforward with it. So we don't have to guess and ask and waste the brokers time finding this out. We now know. It's five customers.

They have a consistent monthly backlog of approximately $1.5 to $2.5 million. They have daily requests for quotes and purchase orders with transaction sizes ranging from several hundred dollars to six figures. They have aerospace and quality management certifications in place. And they have a U.S. export registration with ability to obtain. export licenses as required. They have established and transferable relationships with government qualified U.S. manufacturers and authorized distributors. Indies-free specific ERP systems support inventory, quoting compliance of full traceability. Ownership is open to a structured exit, including potential partial rollover and transition support. They're looking for a strategic or

financial buyer with experience in aerospace, defense distribution, or regulated supply chains. And you can click here to sign the NDA. Brian, are you a strategic or financial buyer with experience in aerospace defense distribution or regulated supply chains? I am. Technically, when I was in the Air Force, I was an aircraft maintenance technician. So very familiarly using these parts to do maintenance on planes to spend some time in distribution as well. So this one's right up in my alley. Yeah.

Is this a good business to be in? It is because there is so much repeatability. like there's before flight inspections, mid-flight inspections, after-flight inspections, there's all of these standard schedules. So like nobody wants to wait for parts that be delivered to be able to do any of that maintenance. Things are pre-ordered well ahead of time, which gives you the reoccurring revenue that most of us are looking for. How much inventory do you think they have to keep to run this business? I guess that's, you know, these smaller deal listings often say how much inventory they have.

And I don't think this one did say that. I would assume it's significant. Yeah, significant in dollars and probably skews, right? Because usually it's small parts that we're talking about. So that's an interesting piece of it. Yeah, the fact they're telling us adjusted evida and interest is part of that leads me to believe they may be financing a big bunch of inventory sitting in a warehouse somewhere. This is like a big conventional line of credit borrower type of business.

And when you carry a lot of inventory versus receivables, they probably have a long cash conversion cycle. Let's just say that. We'll start with, you know, that's from the time that they have to buy and spend money on this inventory to the time that they convert it into cash. You know, it goes to receivables first and then to cash.

It's probably at least, it's probably well over 90 days. That's my guess. You know, it's probably over 100 and some odd days. What do you think, Brian? Yeah, especially when the customers, it seems their customers is probably like the U.S. Navy, the U.S. Air Force and some Boeing or something like that. So they have absolutely no power on terms or pricing. So yeah, I mean, any of these customers can just decide 90, we want to be 120 actually. And like what are they going to do?

Right. And they've got to hold the inventory. They've got to have enough inventory to have it in stock. So that tends to drag out your average inventory turnover even more. So this is one of those businesses where it's a really long cash conversion. cycle and you need to buy the working capital for sure the inventory you're going to buy but you probably need to buy the receivables and have some cash go on balance sheet um to close this deal and be liquid enough to run it and so it's probably a big number so can i can i add a niche a nuance to this that i may have missed when i described it the business is actually um it says it is exclusively export it has an exclusive export for

focus. So that means they are taking U.S. like millspec aerospace and defense components and then selling them to overseas buyers from what I see here. So that's why that's why I was like, oh, this is relatively interesting compared to what I think the dynamic you guys were talking about, where like McDonald-Douglas tells you what they're going to pay you. Yeah, they're going to get care on delivery or they're going to get paid up front before they send it. I think some of this is like the Philippines like Air Force needs a new switch for their aging F-16s and you provide those. Which that's what makes sense because as I look at this like this is almost a $9 million a year business, which is a small distributor. I mean, there are hardwood distributors that do that in a weekend in San Antonio.

But unlike those guys, these guys are operating at almost 25% net margins, which is incredible. for a distributor. Like most of the ones we look at it are what, like 10%, 8% net margins, Heather, sometimes worse. Yeah, yeah, right. Good point. So they've got this really niche market

where they're selling overseas. I guess it would be nice to know, do they have country concentrations? You know, so they said they did tell us they had five customers, you know, are they all in one country or one region? And, you know, what are the risks associated with that potentially? Yeah.

and tariff in fact, potentially. Yeah. Well, our tariffs, it's interesting. Interesting if tariffs, how many of these folks are putting tariffs on military components? And also whether they're, but it's also like,

you think about who your customers probably are here. It's probably like the Saudi Arabian Air Force, like the Dubai, like, you know, Navy, the Philippine Coast Guard. Like, that's probably they have those handful of folks

who've bought U.S. equipment over the years, boats, missiles, all that kind of stuff, and your suppliers of products to them. And your niche is your subscale. So the manufacturers of these things are happy for you to exist because McDonald-Douglas or these guys who are making these aerospace and defense components, they're not wanting to mess around with supplying those guys.

They just want to focus on the big dogs who have big budgets. And it's remarkably consistent. I mean, both in terms of, of, revenue and EBITDA. So, I mean, that's a really good feature. Hi, Heather here. When I'm not breaking down deals with these guys, I'm helping people get the right SBA loans for their business acquisitions. Because when you're buying a business, the best financing isn't one size fits all. There's the best rate, fastest to close, the specific loan structure that you need, or a little of all of those things. That's why my company,

Vizzo Business Capital, works with over 30 different lenders to find you the best funding in less time and with less friction so you can focus on the deal. Sign up for a free live Q&A session on SBA loans at VisoCAP.net. Then click Zoom sign up in the top right corner. That's V-I-S-O-C-A-P.net and click Zoom sign up. Do you guys want to dig into why aerospace is like such a good business to be in, manufacturing parts for it? Have you guys ever looked into the whole business?

I've done like a few SBA loans to aerospace distributors and the switch. the main thing is the switching costs. We'll usually accept some concentrations because they will have them. That's just, you know, very common. But the switching costs are so high to go find a new supplier of whatever it is that they're providing. So it just ends up being very, very stable business. The margins remain stable. The revenue remains stable. There's always demand for it. Yeah. And there's also an incredible amount of parts and components in any individual. flame. It's like Yeah. Yeah. And the beautiful thing about it is, you know, you

as a manufacturer making the let's say the bolts that go into the landing gear for a Boeing aircraft or even a Cessna, right? That may cost you like a dollar to make that bolt. And somebody in theory should come

along and make a bolt just as good or better for $2, but no aircraft mechanic is going to risk people's lives. to save, you know, to save 50% on a bolt. So you turn around, you sell them that bolt for like $5 or $50, right? Because unlike cars and consumer vehicles, if a plane stops working, it falls out of the sky or the wings fall off. And that's really bad.

So it's, you know, ultimately why so many fortunes have been made around, you know, making components for aerospace. And there's, I've got to look up what the roll-up is that's just like a massive beast around, around manufacturing aerospace components, but it's really famous. I'll look it up while we keep talking. Yeah, one of the things I remember about the aerospace distributor deal

that I did finance a couple years ago was the final hard count of inventory. It was very expensive. They had to get a vendor in, and it was very expensive to really confirm exactly what inventory you're getting. This one did make a point in the teaser down a little bit lower

about having really, good systems in place. And it needs to. I mean, like, if you're in this business, you better have great systems in place. So it sounds like you'd have a lot of data to do diligence on. And you'd have to ask this, the seller, you know, when was the last hard count? And as a buyer, you're probably going to have to come in and do your final hard count. And it's going to be, going to be pricey to do it on this deal. One, like two rivet, three rivet. Yep. I've walked through these places where they're in little bins all in the shelves. And, you know, it's incredible how many tiny parts a business like this would have in their warehouse.

It is also a testament to how Boeing can be so massively mismanaged as a business and screwed up so bad and they're still making money. Just because, like, you know, you look at Southwest Airlines has all of these 737s and they have no choice but to keep doing business with Boeing, no matter how stupid Boeing is. It's just kind of crazy. Oh, you know who else is in the aerospace industry? GE. Speaking of poorly run companies. They're in everything. Yeah.

So, Brian, would you call on this one or no? I would. I think there's just enough here to want to know more. Especially when it comes to military, sometimes there can be a lot of different programs underneath one sort of umbrella. So let's say the Saudi Air Force, they could have like 20 programs. So the customer concentration may not be as crazy as it looks.

And definitely want to try to understand more about kind of like the win rates on these RFQs. I actually like the RFQ business model because a lot of times folks have to send multiple RFQs for every order. So you can get a chance there and at bat at new business all the time as long as we try to do that. So I think I would want to dig more into that. And I'm going to say it could get an SBA loan. I think what are they asking, $8 million here? They said not SBA eligible. I don't see anything that makes it not eligible.

It's just a little large for SBA, and I'm sure lenders are going to have a hard time with the concentration, but this is the kind of concentration you might be able to get a lender through because of the nature of the industry. But this, because it's all export, believe it or not, there is an SBA program for exporters that gives the bank a higher guarantee. So normally they get a 75% loan guarantee from the SBA. when it's an exporter, they get a 90% guarantee.

So lenders are actually encouraged and we'll try harder to get these deals done. So this could be an SBA Perry Pesu for the right buyer. I think it actually could work. It has to be the right buyer. But Perry Pesu is where the lender lends $5 million, and then we'll do a conventional loan alongside that for up to $3 million more. So they could maybe do, you know, $6 million, something like that in total debt. on something like this and get the 90% guarantee on the $5 million.

And is the guarantee just because the government wants to encourage more U.S. exports? Trade deficit. Yeah, exactly. It's a trade deficit kind of tool to try to encourage lending and anything they can do to capital flow to exporters. So how would, you know, Brian, as you think about this, how would you grow the business? Do you have any first thoughts around it?

Because that's where this gets really interesting, because this is a big market. They're operating at high margins. they're only working with five, five, six customers, right? Like, how do we make this bigger?

Well, I would try to look at what are the friendlier nations with the U.S. And I think the answers just get into those other programs. I'm sure they run things through RFQs as well. So like I said,

I mean, that's the ad bat. Like, if we can go and look, maybe not Canada anymore, but I think you look at the Canadian Army or sister country there. Like,

you know, what are their needs and what are their process? How is their procurement? work. Yeah, because it's like the needs are going to be the needs of these five programs. They're in. They need more programs. And that gets rid of the customer consultation. To your point, Brian, there's political risk because you are exporting. And if one of those countries kind of goes out of favor with the U.S., you could lose one of your five customers pretty quickly.

Good things. Things are so stable with our relationships with external countries right now. So this is a tangent, but I think it's a case in point of how long some of these manufactured like weapon systems and planes last. There's a whole group of people. And I don't know if you guys have seen these, how they're like the people who are like airplane nerds. They're kind of like train nerds, but they're the same thing for airplanes. Are you familiar with this subculture?

No. As a female, I don't know any of these people. It's kind of like, you know, how some ladies are really into horses. Yeah, okay. Okay, okay, now I'm getting it. For men, it's the same, but for like different types of airplanes and trains. But one of the pilgrimage is that a lot of these airplanes nerds do is to go find like unique flying planes and old kind of stuff. And so like the original Boeing 707, which was like the very first Boeing jet that came out, the last one that was flying was an original kind of basic stock model.

And it was still flying daily flights in Iran as local as a few years ago. Because the Iranians can't get parts from us because of embargo. But I would watch these YouTube videos and guys would go to basically fly on this plane and take pictures of it taking off and get super excited and then turn around and fly back on it. But it's just a testament to how long some of these systems last, which I think is a good thing for this business, right? Even as grumpy as some of these international relationships get, like, once Saudi Arabia buys this stuff, like they're going to be asking for parts for decades, right? as long as that stuff keeps running. All right, so, Brian, I think the big question to ask yourself, like, if you get into this one, like,

are you comfortable, like, flying to all these random countries and, like, figuring out how to sell to these militaries? Like, that's the thing that I feel like, that's the way the growth has got to happen here. They've got a few customers who know to call them, but other than that, like, got to figure out how to sell them more to make this thing a home run. I mean, at four times, it's pretty good,

but, man, I think if you could double the sales, therefore double the profit, that would be killer for this business. my concern is less like maybe cultural and more potentially everything's relationship driven especially with the external governments I wonder if current suppliers are just so locked in at a lot of these countries

and if there is a way to break them off from that I could try but I would imagine I don't know how long this company's been in existence I would imagine they've tried to penetrate some other countries so I think that would be part of my line of questioning is there any kind of ongoing conversations with any other military operations or have to have been attempts in the past and what happened? Because, yeah, that would be the blocker,

especially like, you know, we go over to, you know, the Middle East and, you know, maybe not as friendly to the U.S. and probably a lot of, you know, backhand relationships and things of that nature. So I just want to know, probably have my eyes wide open what I'm walking into. Yeah. Super good. All right.

Well, you guys want to give your final judgment on this deal? Heather, where do you stand? I would want to go further and learn more about it. Thumbs up. Yeah. Brian? Thumbs up at an angle. Look, look, I brought this deal that makes it good.

So I'm excited about it. Brian, if you do then send the NDA, let us know how it goes if you sign it and what you learn about it. yeah, it's got a very binary outcome here. I think it's either going to be awesome or terrible. I don't think there's anything in between. Yeah. Cool.

Well, Brian, I know you're launching your own podcast and stuff soon. How can people follow your journey, find out more about what you're doing? The process you're doing is really cool. So excited to help people follow it. What's the best way? Yeah, so anyone can contact me if they want to on LinkedIn.

There's not that many of us out there. Also in my website, it's a tenant t-e-n-e-t-l-l-c-com. I'm happy to connect with anybody who's interested in learning more about how this works. Anybody who's in the operations looking at different things that's going on. I'm talking to business owners over 200, I think, at this point, and it's still growing. So if I can add value in any way, I'd love to. Amazing. And Heather, you're still at vizocop.net?

Vizocap.net. If you need an SBA loan, come our way. If you just need to be educated while you're searching, come our way. Amazing. All right, guys, thanks for being here. And everybody else, thanks for being here, too. We'll catch you next week.