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Bain Capital made a minority investment in MRO Holdings in July 2024.
Potential investors in the aviation aftermarket have had to reassess their risk calculations this year amid considerable uncertainty surrounding U.S. trade policy and other geopolitical issues. In the second quarter, global dealmaking across all sectors fell to its lowest level in 10 years—aside from one period during COVID-19 lockdowns—as buyers grappled with hazy outlooks for inflation, interest rates and consumer demand on the back of U.S. tariff threats that have waxed and waned with alarming frequency.
“Interest rates, geopolitical and macroeconomic uncertainty create real headwinds to [merger and acquisition (M&A)] activity,” says Jim Harris, a partner and co-lead of Bain & Co.’s global aerospace practice.
“These forces limit the deal activity to places where the risk is minimal and there is the most confidence in the business outlook and sources of deal synergy,” Harris says. “We expect buyers will continue to do deals and pay a premium for assets with the right complementary program exposures and fill critical geographic holes in their networks where they view geopolitical risk as manageable.”
Furthermore, the fundamental reasons supporting consolidation in aviation MRO remain, from fragmented capacity in certain markets to inefficient supply chains in areas such as components, where M&A could help improve turnaround times. For individual companies, meanwhile, adding scale brings access to larger airline customers. Vertical integration, which many engine lessors are pursuing in adding materials services to their platforms, can enhance life-cycle management of aircraft and engine assets.
“Buyers are looking for reliable growth, exposure to the winning aircraft and engine programs in the market, and diversification of customers,” Harris notes. “We expect to see continued consolidation as companies work to round out their portfolios and fill critical gaps as they jockey for position over the next few years.”
RECENT DEALS
Research by consultancy Accenture in support of this article shows 52 MRO-related M&A deals in the first half of 2025, with most led by independent aftermarket players. Often, these focused on horizontal integration in areas like component and engine services. Many of the buyers are U.S.-based, such as VSE, which acquired Desser Aerospace, Turbine Controls and Kellstrom Aerospace across an 18-month shopping spree that culminated in Kellstrom’s purchase for $200 million in December 2024.
Bain & Co. expects to see vertical and horizontal integration going forward. Harris points to recent acquisitions by Airbus and Boeing of Tier 1 suppliers to bolster their supply chains, and to deals targeting capabilities on new-technology equipment. “There are broad attempts underway to reshape portfolios on both the new equipment side and the aftermarket side, to maximize exposure to the growing next-generation platforms and position for future new programs,” he says.
“Independent MROs are the most active consolidators across the aftermarket,” observes John Schmidt, aerospace and defense global lead at Accenture. “Their strategy centers on building multicapability platforms by acquiring adjacent repair shops and parts suppliers, often horizontally.”
One provider often active in the M&A space is Lufthansa Technik, with global operations spanning almost every commercial aircraft platform and MRO category. The company is investing roughly $1 billion across all major regions to cement its market-leading presence, with the capital to support a mix of in-house expansion and bolt-on acquisitions.
“In general, Lufthansa Technik follows a holistic approach to achieve its strategic goals, so there is no preference for M&A over in-house or other organic growth measures, such as greenfield development,” said Kai Neckels, head of business development and M&A at Lufthansa Technik. “However, specific situations for pursuing M&A as a first priority could be, inter alia, time-to-market considerations, access to specific technologies, customer access or a requirement for insourcing.”
Recent deals have shown the company pursuing both avenues. In August 2024, Lufthansa Technik acquired ETP Thermal Dynamics, a U.S. provider of heat exchanger MRO services, noting at the time that the purchase would improve its supply chain resilience and bolster its presence in the Americas.
Later that year, Lufthansa Technik announced it would build a new repair facility in Portugal, its first in the country. Neckels said the facility, which will focus on components and engine parts, was originally a “dual-track” project before the company opted for greenfield development.
More generally, Lufthansa Technik has observed “signals of reluctancy” from MRO players to engage in M&A this year, although Neckels believes that uncertainty-induced caution will be short-lived. “We also perceive a sense in the market that this period will not persist for too long,” he said.
This sentiment is reflected in financial markets which, having originally registered huge swings in response to tariff announcements, now barely budge on threatened new levies from U.S. President Donald Trump, confident that they will never materialize. Neckels’ confidence is not misplaced, as subsequent to his interview, the U.S. and EU agreed to return to zero tariffs on aircraft components.
Lufthansa Technik also tries not to be governed by the geopolitical weather, Neckels said. “Primarily, Lufthansa Technik takes decisions on strategic growth initiatives and the specific measures to take based on its long-term strategy and the appropriate tools to get there; short- or midterm developments are secondary factors in this consideration,” he explained.
That said, geopolitical uncertainty appears to be influencing where deals are being done. Accenture reported a tendency in the aftermarket toward domestic acquisitions—69% of the deals this year—to avoid the potential impact of tariffs and global supply chain issues.
“Rather than a broad rebound, M&A momentum is uneven and favors quality assets,” Schmidt adds. “Buyers with strong balance sheets or committed fund capital are focusing on resilient, cash-generating aftermarket segments. Deal appetite exists, but activity is concentrated around recurring and standardized services like engine and component MRO, and modifications.”
PRIVATE EQUITY INVOLVEMENT
Private equity-led deals accounted for almost a fifth of M&A activity in the MRO sector in the first half of 2025, according to Accenture. The consultancy notes that private equity companies lean toward segments like modifications, test systems and components, which offer predictable and recurring repair volumes alongside clear scaling opportunities.
Examples over the past year have included Bain Capital’s minority investment in MRO Holdings, HIG Capital’s investment in Florida-headquartered STS Aviation Group and Greenbriar Equity’s purchase of Californian MRO provider Sunvair. Asset management giant Apollo Global has also taken interest in the aftermarket. After investing €500 million ($580 million) into the airline’s spare engines in 2022, it made a second foray into the company’s maintenance and spares inventory a year later, putting €500 million into an Air France affiliate owning a pool of components.
“To meet the MRO ramp ahead of us, significant capital will need to be directed toward capacity expansion,” Harris says. “Consolidation of small players into better-funded rivals, or the injection of private capital, can help create the financial strength needed to fund these expansion projects.”
Bridgepoint Group is a private asset investor that has pursued private equity and private credit deals in the aviation market, including a joint venture platform with AIP Capital to invest in engines.
“Our view is that aviation assets in general have several features that are unique relative to traditional private capital strategies that make them attractive,” notes Rohit Dhote, partner and co-head of credit opportunities at Bridgepoint. Among these, he lists downside protection of asset ownership, contracted period cash flow and the upside potential for residual value outperformance.
At AIP Capital, meanwhile, Managing Partners Mathew Adamo and Jared Ailstock say that while aftermarket consolidation has been a feature of certain regions, room remains for smaller players in fast-growing regions. “In the Asia-Pacific, there is a shortage of shop space for nearly everything, not just engines, and there is growth opportunity for captive MROs and new entrants,” they say.
One determinant of consolidation, Adamo and Ailstock add, is OEM policy, particularly around engine maintenance. “We think that Pratt & Whitney will eventually need to embrace third-party shops as the [geared turbofan] program and the underlying customer base expand,” they say. “If true, this would be a positive for third-party MROs overall.”
The two also highlight the tendency for big airlines to set up joint-venture engine shops with OEMs, and CFM International’s willingness to open up its maintenance network for the Leap and move away from comprehensive flight-hour-based deals for the engines.
INTEGRATING NEW BUSINESSES
While the benefits of a new acquisition can seem compelling on paper, integrating systems and people into the wider business can be difficult after a deal is closed.
“Clear communication and careful integration planning are key cornerstones for any successful integration,” Neckels said. “Lufthansa Technik has processes in place, relevant in-house expertise and a successful track record in integrating new businesses. Nevertheless, we want to get a little better every day, of course.”
Harris observes that savvy purchasers fixate on value creation and focus their integration efforts on delivering that goal. “They put top talent in charge of the integration, are thoughtful about what part of the business is tightly integrated versus kept at arm’s length and make sure to protect the unique elements of the acquired company that made it a valuable acquisition in the first place.”
Accenture’s Schmidt points to VSE’s purchase of Kellstrom as an example of how successful integration can drive value. Kellstrom’s distribution and global parts network complemented VSE’s repair capability, enabling a unified service offering. This alignment helped drive a 58% year-over-year revenue increase in the first quarter of 2025.
“Acquirers that targeted companies with similar customers, complementary certifications and overlapping workflows were able to integrate more seamlessly,” he adds.
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