It was a marriage made in private equity heaven when aerospace and defense specialist J.F. Lehman & Co. and generalist Morgan Stanley Private Equity teamed up recently to make co-investments in domestic and global aerospace and defense companies.
The partnership serves both sides equally well because Morgan Stanley will be able to get its feet wet in the aerospace and defense sector while J.F. Lehman, which has been in the industry for a decade, will be able to fund opportunities in the $1 billion plus range.
“We both have the same kind of investment philosophy, time horizons, approach to risks and we feel very close culturally,” said John Lehman, founder of J.F. Lehman.
Actually, Lehman has been out of the private equity limelight for the last year or so. Lehman attributed this to a ramp up of pricing in the aerospace and defense industry by aggressive financial buyers. Lehman’s most recent deal includes selling portfolio company Special Devices, Inc. (SDI), a manufacturer of precision engineered pyrotechnic products that are critical to tactical missiles and space launch vehicles, to Danaher Corp. (Buyouts June 18, p. 30). Deal flow for the firm should pick up considerably with its new financial partner in place.
“We went through a period…where an awful lot of generic financial buyers with no industry expertise jumped into these aerospace auctions and bid the prices to crazy levels,” Lehman said. “That resulted in us pulling back from the market because we kept getting outbid. But groups today like Wind Point, Veritas and Carlyle have a good grounding of aerospace and defense assets, and that means they’re not paying crazy prices. Our deal flow is looking much better.”
The formidable duo is already scouring London for prospective sellers.
Lehman said his firm recently set up shop in London with Morgan Stanley, which already having a large presence there, and the two are currently working on two deals. Lehman also alluded to the fact that the firms may see a close on those deals as early as July.
In addition to its new-found financial capabilities, Lehman is also powering up its operations with the addition of Christopher Lewinton as a managing principal in its London office.
Prior to joining J.F. Lehman, Lewinton served as chairman and chief executive officer of TI Group PLC, a global specialized engineering group, which he joined in 1986.
Lewinton will head the group’s European operations.
“He did well over 200 deals in the 14 years that he was with TI, and he’s spent a lot of time here in the U.S.,” Lehman said. “He’s got a hands-on engineering executive background and considerable experience as a deal maker. He is a real deal guy.”