Reflecting on the last two years, there’s a noticeable trend of operators supported by private equity (P.E.) groups becoming increasingly active on the buyer side of the market. The beginning of 2025 further indicates this trend is persisting.
The “Roll Up” model for FBO has seen considerable success in the high-end market, generating interest in middle-market FBOs and now constituting the majority of buyers in this sector.
Private equity-backed entities, with varied organizational structures, experience, and capabilities, have entered the market, presenting both opportunities and challenges for sellers.
Trend or Evolution?
This consolidation of FBOs in the industry seems more like the next evolutionary step for the FBO market rather than a temporary trend. However, as it attracts new players and entity structures, the market is experiencing a chaotic phase in its evolution.
This evolving nature of FBO acquisitions and mergers brings numerous challenges, particularly in the vetting process of buyers and ensuring a high quality closing process.
Quality of Closing
The experience and involvement of the private equity (P.E.) group in the initial offering, Q of E, and overall closing process are critical factors that often highlight disconnects with their operating partner.
Understanding the structure of the partnership between the Operator and the P.E. group is essential to ensure their viability as an entity capable of executing a high-quality closing and addressing any potential challenges that may arise.
Another pitfall in this roll-up/consolidation model is when recently acquired FBOs in the buyer’s portfolio fail to hit their target, which can and often does come back to haunt them in the middle of closing their next acquisition.
This issue arises largely due to operators, eager to quickly deploy allocated P.E. capital, pay higher multiples for FBOs with the aim of enhancing performance to justify the higher acquisition cost.
However, if these FBOs fail to meet their EBITDA targets, the P.E. partners become more cautious and involved, resulting in a more complex Q of E process. This leads to multiple parties scrutinizing the financials, operations, and projections made.
Keys to a Successful Transaction
To achieve a strong purchase price and ensure a seamless closing process, it’s crucial to understand the evolving marketplace, its current players, potential opportunities, and possible pitfalls.
Leveraging our extensive knowledge of buyer preferences and capabilities is vital in securing a favorable suitor and purchase price for our clients while maximizing the likelihood of a smooth transaction.
Our expertise in accurately assessing and valuing FBO operations, combined with a deep understanding of the current market, allows us to proactively address many challenges. However, as the landscape continually shifts, our agility and preparedness are constantly put to the test.
We’ll keep you posted as the year unfolds!
Charles Precht
Executive Vice President
FBO Advisors © 2023