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									                                                                                                         December 2005

                                   Grant Thornton Corporate Finance
                                   mergers & acquisitions

Aerospace Components M&A
                                   Aerospace Components:
• Industry drivers                 Structural factors, strong demand and
• M&A Activity                     private equity investments drive mergers
• Valuation benchmarks
                                   and acquisitions
• Private equity
                                   The Aerospace Component sector is seeing a significant increase in
                                   merger and acquisition activity fueled by:
                                   • private equity interest in the sector;
                                   • benefits of consolidation in a fragmented industry;
                                   • suppliers facing increasingly demanding customers;
                                   • private business owners approaching retirement age; and
                                   • buoyant orders for aircraft and parts.
Grant Thornton Corporate Finance   Industry drivers
Mergers & Acquisitions             Strong demand is being seen in the U.S.     To simplify their supply base and
                                   Aerospace Components sector:                control costs, OEMs and their tier one
Industrials Group
                                                                               suppliers are shifting preferences
                                   • Net new orders are expected to show a     towards manufacturers delivering
Ian Cookson                          20% increase for 2005. AIA reports        entire systems and sub-assemblies as
                                     that the sector is on pace for almost     opposed to individual components.
                                     $200 billion in net new orders for the    This is encouraging suppliers to
P: 617.848.4982                      year, compared with $165 billion in       respond through consolidation and
E:                2004. 1                                   providing additional value-added out-
                                   • The backlog of unfilled orders            sourcing.
Benjamin Gerwin                      supports continued strong demand
Associate                            into 2006, with almost $230 billion in    Many owners of component
                                     unfilled aerospace orders at the end of   manufacturers are reaching retirement
P: 617.848.4873
                                     the first half of 2005. 2                 age and are looking to monetize
E:                                                      ownership:
                                   • Higher fuel costs are driving demand
                                     for more efficient, newer commercial      • private equity has proven an active
226 Causeway Street                                                              buyer in the industry; and
                                     aircraft models.
Boston, MA 02114
                                   • Military spending has expanded,           • transitioning ownership through the
                                     accounting for over 60% of aircraft         use of external capital is more likely to
                                     spending in 2004 compared with less         increase value for departing
                                     than 50% in 2000. 3                         shareholders.
                                                                                                           December 2005         2

M&A activity
M&A activity within the Aerospace          • Strategic buyers continue to seek          • creating more substantial businesses
Components sub-sector has picked up          acquisitions that bring: proprietary         better able to support capital
considerably. (Table One illustrates 15      technologies; achieve scale; and             expenditure needs; and
representative aerospace component           enhance component offerings.
                                                                                        • providing valuation multiple expansion
transactions that have occurred since Q1
                                           Sector consolidation through M&A               through increased scale.
                                           activity can provide tangible benefits for
• Private equity players have become       components suppliers through:                The components sector is highly
  major participants in the sector and                                                  fragmented – around 1,500 companies
                                           • driving improvements in design and
  account for roughly half of the                                                       with combined annual revenue of $45
                                             manufacturing processes to enhance
  transactions taking place. Over the                                                   billion support major OEMs.2 The
                                             innovation and create production
  past eighteen months, they have                                                       typical aircraft parts company has
  completed numerous stand-alone                                                        revenue of $25 million and 150
  acquisitions of components               • reducing customer concentration;           employees.

Table One: Recent Aerospace Components Transactions

Source: Company filings, press releases

                                                                                                               Grant Thornton, LLP
                                                                                                             December 2005       3

Valuation benchmarks
In 2005, acquisitions less than $25 million   • exceptional customer position; and       • More specialized technology and
in size took place at an average multiple                                                  systems providers support higher
                                              • significant size.
of 5.8x EBITDA (across all sectors). This                                                  market valuations between 9.0x - 11.0x
compares with a higher multiple of 8.5x       Public Company Trading Comparables           EBITDA.
EBITDA for larger transactions                As with private company transactions,      • Company size is an additional factor
(between $25 million and $250 million) .4     public market aerospace component            contributing to a difference in trading
Although terms of smaller private             supplier valuations tend to increase in      valuations.
aerospace component company                   line with the sophistication of a
transactions tend not to be disclosed,        company's offerings. Generally, the        • With improved earnings, not only have
higher multiples are paid for businesses      more precision and advanced technology       absolute valuations increased, but
with:                                         required for a particular component, the     trading multiples have risen as well.
                                              greater the trading valuation:               Public company enterprise value
• proprietary technology & design;
                                                                                           market multiples for the sector have
• rapidly growing aftermarket business;                                                    risen since 2001 from around 5.6x
                                                                                           EBITDA to over 9.0x EBITDA.
Table Two - Aerospace Component Public Trading Multiples
                                                                                         Private equity
                                                                                         Private equity players are being attracted
                                                                                         to the sector by the prospect of pursuing
                                                                                         a buy and build strategy, thereby:
                                                                                         • capturing the benefits of consolidation;
                                                                                         • gaining price multiple expansion from
                                                                                           subsequent demand among strategic
                                                                                           buyers for businesses of significant
                                                                                           size. >

Source: Capital IQ as of December 2005

                                                                                                                 Grant Thornton, LLP
                                                                                                                        December 2005      4

                                         Consequently, private equity is proving an        The combination of: lengthening backlogs;
                                         attractive alternative source of additional       strong availability of capital; an aging
                                         buyers, providing sellers a greater               shareholder base; and increasing demands by
                                         opportunity to maximize value – particularly      OEMs should ensure continued M&A
                                         for those businesses which may not be             activity among aerospace component
                                         critical acquisitions for strategic buyers.       manufacturers. Private equity has become a
                                                                                           useful source of capital for owners seeking to
                                         • The private equity community has                maximize value or to embark on acquisition
                                           substantial capital seeking investment          strategies.
                                           (around $100 billion) and debt availability
                                           is high.                                        Footnotes
                                                                                           1: AIA Update October 2005
                                         • The private equity market is itself highly
                                           fragmented – providing business owners a        2: First Research Aircraft Parts Manufacture
                                                                                              Industry Profile
                                           significant challenge to identify the right
                                           partner.                                        3: U.S. Dept. of Commerce; Department
                                                                                              of Defense; General Aviation
                                         • Private equity transactions can prove              Manufacturers Association; AIA
                                           highly favorable for ongoing management,        4: Thomson Financial U.S. M&A
                                           providing management teams with the                Transactions
                                           opportunity for significant ownership and
                                           independence going forward.

About Grant Thornton Corporate Finance LLC                             About Grant Thornton LLP
Grant Thornton Corporate Finance LLC provides investment banking       Grant Thornton LLP is the U.S. member firm of Grant Thornton
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The factual statements contained herein are taken from sources         Grant Thornton LLP offers investment banking services through its
believed to be reliable, but such statements are made without any      wholly owned broker-dealer subsidiary Grant Thornton Corporate
representation as to accuracy or completeness or otherwise. Grant      Finance LLC.
Thornton Corporate Finance LLC does not engage in the business of
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