Acquisitions heat up for MRO providers

The mergers and acquisitions market in the field of maintenance outsourced providers stepped up a notch this week with Dubai Aerospace Enterprise (DAE) announcing a $1.9 billion acquisition of engine maintenance firm Standard Aero and aviation maintenance company Landmark Aviation.

The integration of these companies within their Middle Eastern operations under DAE Engineering will further develop the company's capacity to deliver services for commercial engines such as the the General Electric CF34, the Rolls-Royce AE3007 and Model 250, and Pratt & Whitney Canada’s PW100 and PT6 as well as a range of propellers and auxiliary equipment.

The purchase shows the growing interest in asset maintenance companies by large investors such as the state backed DAE, and is part of the increasing trend towards further consolidation within the industry. This is particularly true of the burgeoning aerospace industry within the Middle East as providers scramble for position to provide the services the industry will be requiring.

As the prize continues to increase and more companies lean towards outsourced maintenance providers, we are expecting to see even further consolidation in the area of services and technologies as companies try to cash in on the need for reliability in process, infrastructure, aviation and utility industries particularly.

However it also shows another uncomfortable side to the acquisitions feast. The Middle East is not known for fair trading practices or for providing open access for all competitors. Nepotism, national associations, and the "boys club" tend to determine who will walk away with what part of the pie, rather than the best value for money.

This means that companies backed by state funding and entrenched discriminatory practices will be able to stride through the worlds markets taking advantage of open markets and lax ownership laws within the developed world.

Interesting times for investors looking for the next take over target. The recently rebuffed offer by Transfield Services for GRD in Australia, the recent takeover of Maximo by IBM, the private purchase of Aladon by Ivara are all signs of that the market is heating up as even small and mid size firms strive to be a part of the bigger picture.

Equipment, Maintenance and Technology is part of the Lassiter Group. (C) Lassiter 2007.