Deal Talk: Warburg Pincus and Berkshire Partners to take Triumph Group Private

Good morning. Welcome to The Deal Talk where each week we break down a recent M&A deal.

Today we’re going to be walking through Warburg Pincus and Berkshire Partners’ planned acquisition of Triumph Group.

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DEEP DIVE
Warburg Pincus and Berkshire Partners to Acquire Triumph Group for $3 Billion

Triumph Group, Inc. (NYSE: TGI), a leading aerospace components manufacturer, has entered into a definitive agreement to be acquired by private equity firms Warburg Pincus and Berkshire Partners. The all-cash transaction is valued at approximately $3 billion, including Triumph's net debt of $1.3 billion.

Triumph Group specializes in designing, engineering, manufacturing, and overhauling a broad portfolio of aerospace and defense systems and components. Serving both original equipment manufacturers (OEMs) and operators of commercial and military aircraft, Triumph operates approximately 36 facilities across North America and Europe, employing around 4,800 individuals globally.

Warburg Pincus is a global private equity firm with over $80 billion in assets under management, focusing on growth investing across various sectors, including aerospace and defense. Berkshire Partners, based in Boston, manages over $20 billion in capital and has significant experience investing in industrials and aerospace companies.

Strategic Rationale

The acquisition of Triumph Group aligns with Warburg Pincus and Berkshire Partners' strategy to invest in companies with strong positions in the aerospace and defense sectors. Triumph's expertise in mission-critical aerospace components makes it a valuable addition to the firms' investment portfolios.

Dan Crowley, Triumph's Chairman, President, and CEO, stated that the transaction recognizes the company's position as a valued provider of engineered systems and proprietary components. As a privately held company, Triumph anticipates enhanced flexibility to meet evolving customer needs and pursue long-term growth strategies.

For Warburg Pincus and Berkshire Partners, the deal offers an opportunity to capitalize on the recovering aerospace sector, driven by increasing air travel demand, fleet modernization, and rising defense budgets. The aerospace parts market is projected to grow at a compound annual growth rate (CAGR) of 4.2% through 2030, reinforcing the demand for high-quality components.

This acquisition is expected to strengthen Triumph's position in the aerospace supply chain, leveraging the operational expertise and financial resources of the new owners.

Financial Impact & Market Multiples

Under the terms of the agreement, Triumph shareholders will receive $26.00 per share in cash, representing a 123% premium over the company's unaffected closing stock price prior to reports of a potential sale. The transaction is expected to close in the second half of 2025, subject to customary closing conditions, including approval by Triumph shareholders and regulatory approvals.

Key Financial Metrics:

• Transaction Value: $3 billion enterprise value (includes $1.3 billion net debt)

• Share Price Premium: 123% over the unaffected closing stock price

• Revenue: $1.24 billion for the trailing twelve months (TTM)

• EBITDA: $180.64 million for the TTM

• Market Capitalization Pre-Deal: Approximately $1.96 billion

• Enterprise Value/EBITDA (EV/EBITDA) Multiple: Approximately 16.6x

This valuation reflects Triumph's strong position in the aerospace industry, particularly its high-margin aftermarket services and defense contracts. The premium valuation is indicative of the company's strategic importance and growth prospects within the sector.

Deal Structure & Financial Advisors

The acquisition will be executed as an all-cash transaction, with Triumph shareholders receiving $26.00 per share. The transaction has been unanimously approved by Triumph's Board of Directors and is expected to close in the second half of 2025, subject to shareholder and regulatory approvals.

• Financial Advisors:

  • Triumph Group: Goldman Sachs

  • Warburg Pincus and Berkshire Partners: Lazard

Opinion & Outlook

What Could Go Right?

• Enhanced Market Position: The acquisition could bolster Triumph's competitive standing in the aerospace sector, enabling it to capitalize on emerging opportunities.

• Strategic Alignment: Warburg Pincus and Berkshire Partners' investment may provide the necessary resources and expertise to drive innovation and operational efficiency within Triumph.

• Operational Synergies: The partnership could lead to improved supply chain management and cost efficiencies, benefiting both Triumph and its customers.

What Could Go Wrong?

• Integration Challenges: Aligning Triumph's operations with the strategic objectives of Warburg Pincus and Berkshire Partners may present complexities, potentially affecting business continuity.

• Market Volatility: Fluctuations in the aerospace industry, such as changes in defense spending or commercial aircraft demand, could impact the anticipated benefits of the acquisition.

Conclusion

This acquisition highlights private equity's strategic interest in aerospace suppliers with robust aftermarket and defense portfolios.

Warburg Pincus and Berkshire Partners aim to leverage Triumph's streamlined operations and strong industry relationships to capitalize on the sector's growth.

The success of this venture will hinge on effective integration and the ability to navigate industry cyclicality while enhancing R&D and operational efficiencies

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See you next week,

The Deal Talk Team