Who's on your 'shopping list'?

Citation

(1999), "Who's on your 'shopping list'?", Aircraft Engineering and Aerospace Technology, Vol. 71 No. 4. https://doi.org/10.1108/aeat.1999.12771dab.056

Who's on your 'shopping list'?

Who's on your "shopping list"?

Keywords: Publication, Acquisition, Aerospace industry

Where can you go to get the low-down on companies within the Aviation Equipment business that might make good acquisitions? Plimsoll Publishing has just produced a "Special Acquisition Pack" on the Aviation Equipment business highlighting 55 companies that would make intriguing acquisitions, based on Plimsoll's analysis. "I just believe that looking for a good acquisition prospect shouldn't have to be so difficult", says Managing Director, Don Turkington.

Plimsoll analysed the entire Aviation Equipment industry to find companies that were under performing yet were fundamentally very profitable (Figure 1). The companies chosen achieved a better than average gross profit margin yet produced very low pre-tax profits and even losses!

Interestingly, Plimsoll found that the earning potential on these companies was higher than many companies in the industry who were much more profitable. On average the companies with good potential were earning almost 32 per cent in gross profit margins compared to the industry average of 24 per cent. Yet, these companies were only returning 1.8 per cent pre-tax profit margin compared to the industry average profit margin of 5.4 per cent.

Figure 1 Aviation equipment

Plimsoll has demonstrated in their acquisition pack that these companies have the potential to make much greater returns. By adding on to each company's analysis a "what if?" future year they have modelled every company to generate a 10 per cent return on assets within one year. In addition, the "Special Acquisition Pack" comes with the data and analyses in electronic form on a diskette. This allows the "busy manager" to "play" around with the figures by adding future years of plans based on his own ideas for those companies that take his fancy.

In analysing the Aviation Equipment industry, Plimsoll located 141 companies that were achieving 10 per cent or greater return on assets which seemingly proves that it is possible in the Aviation Equipment industry to make good profits. Choosing the "magic 10 per cent" is therefore a credible benchmark for companies in the industry.

An interesting finding to come out of this analysis was that most of these potential acquisitions were paying higher than average wage bills and interest payments which was losing the advantage they had at the gross margin level. For instance, on average, those companies with good potential were paying 32 per cent of their sales on wages, whereas, the companies with an above average return on assets were only paying 29 per cent of their sales on wages.

The Plimsoll "Special Acquisition Pack" on the Aviation Equipment business was created for the busy manager to assess and create a "shopping list" of companies that would make good acquisitions if the owners were willing to sell. This list is to be used prior to bringing in professional advice.

Within this "Special Acquisition Pack", is a bound book in which each of the 55 companies are individually analysed using the company's last four years audited accounts. Added to each analysis is a "what if" fifth year. This computer generated future year demonstrates the worth of future earning potential of each company. Because searching for acquisitions is private and individual, the "pack" contains a separate book containing 1,218 individual company analyses of the major UK players from the Aviation Equipment industry. This pack also comes with a diskette containing all the information for enhanced analysis.

>To order a copy of the "Special Acquisition Pack" for a 10 per cent discount on the full price of »450.00 ring Plimsoll Publishing on +44 (0)1642 257800 and mention that you read about the pack in this magazine.