KAL Capital Q4 2021 A&D Review

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Dear Friends,

Happy New Year! We hope everyone had a great holiday with their friends and family. For KAL, we were fortunate to celebrate the five-year anniversary of the firm with a tremendous 2021. The year marked several important milestones, including a record-setting amount of transactions activity, both in terms of deal quantity and value. We successfully advised on the sale of some truly amazing businesses, each leaders in their respective niches, owned by high-quality individuals and partnerships. None of this would have been possible without the broader KAL team, which continues to grow every year!

Reflecting back on 2021, the M&A market broke every possible deal quantity record and shattered previous all-time high valuation metrics. Activity was bolstered by owners looking to transact ahead of changes in capital gains tax treatment that was (and still is) a clearly communicated priority of the Biden Administration. This flood of deal activity was met with open arms by buyers of all types, but in particular the private equity community. The exponential increase of capital allocated to both private equity and debt firms has created a competitive environment within M&A processes for quality businesses without historical precedence. In our KAL M&A processes, we have seen buyers compete for businesses not only at valuations that range 30-50% higher than 2015 levels but also coupling eye-watering valuations with abbreviated timelines that give sellers certainty of close months earlier than previously considered market.

Looking into our crystal ball, we expect 2022 to be another terrific year for both KAL as well as the aerospace and defense M&A market. Thematically, we expect commercial aerospace OEM-driven transactions to re-emerge after a two-year hiatus as the B737MAX and B787 get back on track. We have high-hopes for Boeing to reverse the momentum of Airbus on the new orders and production side, and hopefully reduce the excess inventory that has limited the recovery of the supply-chain. On the defense-side, we see 2022 as a continuation of the strength demonstrated by nearly all defense sub-sectors. In our practice, we are big believers in a few different areas including hypersonics, space and the B-21.

Purposefully, we have left any mention of COVID-19 to the very end of these opening remarks. That is really because the M&A market and commercial aerospace both seem to be totally reflecting an acceptance of the permanence of the disease. We see essentially zero disruption in our practice from the latest strain, and our sincere hope for 2022 is that we talk less about COVID and more about amazing outcomes for our clients.


Trevor Bohn and Ryan Murphy