How Aerospace Businesses Are Valued
Aerospace is one of the most multiple-stratified industries I work in. A $20M-revenue machine shop making non-critical commercial parts trades at an earnings multiple. A $20M-revenue shop with the same financial profile but proprietary FAA Parts Manufacturer Approval (PMA) on a sole-source defense program trades at 12x. Same revenue, same margin, wildly different multiples. Understanding why is the entire game.
Three things drive the spread: customer mix (defense vs. commercial vs. MRO), contract economics (sole-source vs. competed, IP-protected vs. build-to-print), and certification depth (AS9100, NADCAP, FAA PMA, ITAR, DoD security clearances).
Defense-Prime Suppliers (platform-tier earnings multiples)
Tier 1, 2, and 3 suppliers to the major defense primes, Lockheed Martin, Raytheon (RTX), Boeing Defense, Northrop Grumman, General Dynamics, L3Harris, trade at platform-tier earnings multiples. The driver is contract longevity and visibility. A sole-source position on an active program (F-35, B-21, Columbia-class submarine, JASSM, Patriot) gives buyers years of revenue visibility, and they pay for it.
Defense PE buyers, The Carlyle Group, Veritas Capital, AE Industrial Partners, Arlington Capital, actively consolidate this segment. AE Industrial in particular has built multiple platforms by acquiring sub-$50M defense suppliers and rolling them up to $200M+ exits at meaningfully higher multiples.
Commercial Aerospace (platform-tier earnings multiples)
Suppliers to Boeing Commercial, Airbus, Embraer, and Bombardier trade slightly lower at platform-tier earnings multiples. The build rate cycle is the dominant factor, multiples expand when build rates are climbing (2017-2019, late 2026) and compress sharply when programs are paused (737 MAX 2019-2021, 787 deliveries 2021-2022). Tier 1 suppliers like Spirit AeroSystems (SPR) sit at the lower end because of fixed-price program risk and concentrated customer exposure to a single OEM.
MRO (platform-tier earnings multiples)
Maintenance, repair, and overhaul businesses, both engine MRO and airframe heavy maintenance, trade at platform-tier earnings multiples. Engine MRO commands the higher end because of OEM partnership requirements (CFM, GE, Pratt & Whitney, Rolls-Royce authorized facilities) and the long-cycle nature of engine overhaul revenue. Airframe MRO is more competitive and typically lower-multiple unless the business has wide-body capability and OEM-recognized check capability.
Premium Specialty (platform-tier earnings multiples)
The two reference points everyone in aerospace M&A talks about are TransDigm (TDG) at platform-tier earnings multiples and HEICO (HEI) at 15-22x. Both have built themselves by acquiring proprietary, sole-source aerospace component businesses with FAA PMA, low-volume/high-margin economics, and effectively inelastic demand from operators. Howmet Aerospace (HWM) at 12-18x is another useful premium reference for engineered aerospace components at scale.
When an SMB or mid-market aerospace business has the right characteristics, proprietary IP, sole-source position, FAA PMA, recurring aftermarket revenue, sophisticated buyers (TransDigm itself, HEICO, or PE looking to flip to one of them) will pay platform-tier earnings multiples. Demonstrating you fit the profile is the entire seller-side narrative.
What Drives Aerospace Value
Long-term contracts and program longevity are the single most important factor. A Long-Term Agreement (LTA) with Boeing or a sole-source defense award with 10+ years of remaining program life is worth a substantial premium versus PO-by-PO commercial work.
Certifications and qualifications are gating credentials. AS9100D, NADCAP for special processes, FAA Repair Station certificates, ITAR registration, and active DoD security clearances aren't nice-to-have, they're prerequisites for participating in most of the buyer universe. Buyers will pay for in-place certifications because the 18-36 month re-certification timeline is a real opportunity cost.
Engineering capability and IP separate "build-to-print" shops from "build-to-spec" or proprietary parts manufacturers. The higher you sit on this ladder, the higher the multiple. FAA PMA on legacy parts where the OEM is no longer producing is essentially a cash machine and gets valued accordingly.
Defense vs. commercial mix affects multiples both up and down depending on the cycle. Right now (late 2026), defense exposure is a premium because of sustained DoD budget growth, while commercial is recovering but still cycle-sensitive.
Backlog quality is heavily diligenced. Buyers want signed POs and firm-priced LTAs, and they'll discount "forecast" backlog or non-binding letters of intent.
What Decreases Aerospace Value
Customer concentration is endemic in aerospace and the most common valuation drag. A Tier 2 supplier with a percent-of-revenue figure from a single Boeing program will trade at a meaningful discount because the program-pause risk is real and recent (737 MAX, 787).
Key engineer retention risk matters more here than in most industries. Programs depend on small teams of cleared, certified engineers who may not transition cleanly. Buyers structure earn-outs and key-person retention bonuses around this directly.
Fixed-price commercial program exposure with no escalation clauses became an industry-wide problem during the 2021-2024 inflation spike. Buyers now scrutinize every major contract for inflation pass-through, raw material indexing, and labor escalation. Contracts without these protections get discounted.