Thoughts on the consolidation of fixed base operations, from one who has been a long-term FBO player turned investor ...
Researching this issue’s Business Profile (page 18) included an interview with Blake Fish of Quantem FBO Services, LLC. Fish is a veteran of the FBO industry — including top positions with Signature Flight Support and Atlantic Aviation — who in recent years turned to the FBO investment arena that had been a flurry of activity, up until the past year or so.
On the suggestion that the FBO acquisition frenzy appears to be on hold, Blake comments, “I think it is. I don’t think anybody knows what the rules are anymore.
“We thought we knew what the rules were at the end of the acquisition explosion. You knew where you thought the multiples would end up; you knew what kind of city it was; what kind of airport it was. With the level of activity down substantially, the valuations are different and the ability to acquire debt is different.
“We just need to figure out what the new rules are. Everybody is just on pause.”
Next question. At one time, the level of commitment of FBO owners wasn’t a question, being that they were long-time aviation players. In the past ten years, new money — not aviation money — bought up FBOs. The question remains, what is the level of commitment of the new players?
Comments Fish, “Part of what has occurred in our business, as part of this influx of financial capital, is an awareness for a lot of us in the industry that this is a business at the end of the day. There are things that we want to do because we believe it’s the right thing to do as part of our commitment to aviation, but we also have to be smart about how we do them. We have to look at them from a business perspective.
“That’s a change that occurred in our industry overall. I think there’s a discipline in our business that maybe wasn’t there before.”
Then there’s the question of multiples — what those making the acquisitions paid, often the subject of speculation. At the same time, this has been an industry sector rife with consolidation.
Says Fish, “I think there’s still the opportunity for consolidation; I believe that. I don’t think it was done.
“I can’t imagine that the multiples will be what they were, because I don’t think you’re going to be able to get the debt levels. So, it’s going to require more equity and the return required by the investors. The cash flow requirements will be higher, so you’re not going to be willing to pay as much.
“I think people are just going to be more sober and more conservative.
“Certainly, some of the multiples that we saw at the end, you just couldn’t understand how they could be paid with the high debt level. When you take a place that has a very high multiple and all of a sudden you cut the business by 25 percent, it’s a scary prospect. Liquidity becomes an issue.”
Thanks for reading.