KAL Capital Advises Kittyhawk, Inc.’s Acquisition by Trive Capital

Trive Capital (“Trive”), the Dallas-based private equity firm, is excited to announce its recent investment into Kittyhawk, Inc. (“Kittyhawk” or the “Company”), a leading provider of Hot Isostatic Pressing (“HIP”) services for a variety of industries including space, commercial aerospace, defense, and medical applications.

HIP is an integral service that improves the strength and metallurgical properties of casted and additively manufactured parts. Kittyhawk specializes in servicing parts for high-temperature, high-pressure, and high cost of failure applications such as rocket and jet engine componentry.

Founded in 1981, Kittyhawk is a leading provider of HIP services on the West Coast from its locations in Garden Grove, CA, and Canby, OR. The Company is trusted by many of the largest aerospace, defense, and space OEMs to increase the performance and safety of their most iconic platforms.

KAL Capital served as a financial advisor, and Perkins Coie served as legal counsel to Kittyhawk. Haynes & Boone LLP served as legal counsel to Trive Capital.

KAL Capital’s Q+A Regarding Kittyhawk Acquisition

What made Kittyhawk such an attractive asset?

Murphy: The business was incredibly well received by the market and had strong interest from both strategic and private equity buyers.  The basis of that interest was anchored around the fact that Kittyhawk serves a growing, attractive niche with incredibly high barriers to entry. The primary growth vectors of the business are 1) the recovery of the commercial aerospace supply-chain and 2) the increased tempo of space launch driven by SpaceX, Blue Origin and emerging launch providers.

Bohn: The core service offering, Hot Isostatic Pressing, is a highly specialized type of heat treatment that requires substantial upfront capital investment and highly skilled operators.  Additionally, while this service has traditionally been used as a mission-critical piece of the aerospace casting process; HIPing has now emerged as a requirement for any flight critical 3D printed part.  The implications for our M&A process were profound, as opportunities with true exposure to 3D-printing are few and far between.

What is next for the aerospace heat treating industry generally and Kittyhawk specifically?

Murphy: Our perspective is that buyers will continue to aggressively pursue assets within the heat treating sector.  The financial profile of the businesses is generally attractive due to the tolling nature of the model plus the remaining providers have generally achieved a level of scale that gives them the ability to maintain attractive margins.  The sector remains relatively fragmented which means that private equity will predictably look to provide capital to consolidate.  We believe that this transaction will be the first of several aerospace heat treat and HIPing transactions over the next several years.

Bohn: For Kittyhawk, my guess is that Trive Capital will be looking to insistently consolidate not only the HIPing sector but expand into logical adjacencies.  Part of what made Trive attractive to our client was their pedigree and track-record of successful roll-up strategies within the aerospace supply-chain, namely Valence Surface Technologies.  Our belief is that Trive will be looking to repeat aspects of that successful investment including aggressively looking for additional M&A targets to expand geographic reach and offer additional services to the existing customer base.

What broader trends within aerospace & defense M&A does this transaction illustrate?

Murphy: For me, this illustrates the consistent energy of the private equity community for assets within our sector.  The growth story of Kittyhawk was relatively straightforward to communicate as its core customer base of aerospace casting providers were increasing activity based on commercial aerospace build-rates plus the new space sector continued to expand at an aggressive rate.  The sponsors were able to underwrite an attractive investment case based on the expected growth and were then able to pursue the opportunity aggressively.

Bohn: It’s as simple as quality and scarcity value will always command premium multiples, regardless of market conditions. Kittyhawk offers a highly unique solution that commanded the attention of strategic and financial buyers.  On top of that, we had a great management team that wanted to remain with the business. It’s a great outcome for all participants.