ECI, the UK mid market buyout specialist, has agreed to sell Racal Acoustics (
www.racalacoustics.com) to Esterline Technologies Corporation for £115m. Completion of the transaction is contingent only on German regulatory approval and is expected to take place in late January 2009.
Based in Harrow, Racal Acoustics is the world’s premier provider of specialist hearing protection and communications products for military and avionics applications. Its headsets are used all over the world by 120 branches of the military in more than 80 countries. Its market leading Raptor electronic noise reduction headset, launched as recently as 2006, is used extensively by soldiers to improve communications and to protect their hearing from high ambient noise environments (eg inside military vehicles) and from sound blasts from IEDs (roadside bombs). Prince Harry used a Racal Acoustics headset during his recent tour of duty in Afghanistan.
ECI invested in Racal Acoustics in August 2005, backing the management team in a buyout from JF Lehman, a US private equity investor. Since then, the business has experienced dramatic growth which it expects to continue as militaries focus on improving communications and hearing protection for the fighting soldier. Revenues have grown by 110% from 2004 to this year, and profits in the same period are up nearly 150%. The business has a record order book that will drive continued growth next year and into the medium term. Since the buyout, the business has sustained its UK employment levels (where it carries out the most skilled parts of its manufacturing and design process) notwithstanding its use of overseas manufacturing facilities to ensure it remains cost competitive in global terms on high volume products.
Throughout the period of ECI and management’s ownership, the business has continued to invest heavily in R&D, most of this carried out by internal experts employed by the business. This R&D programme has resulted in numerous world-leading products which include the Frontier “in-the-ear” product for dismounted troops and the world’s first military-grade fully digital headset which the business expects to start shipping during 2009. The business will remain at the forefront of soldier hearing protection and technology developments
The MBO team was led by Geof Eeles, CEO of Racal Acoustics along with Terry Buckley (Sales Director), David Watton (Finance Director) and Paul Watson (Operations Director) with other senior managers also taking part.
Ken Lindsay, director of ECI comments:
“Racal Acoustics is a great UK industrial success story. Over the last few years it has developed into a global market leader in its field on the back of a commitment to R&D, market-leading product design capabilities and a great management team”
“Racal Acoustics is exactly the sort of business that ECI likes to invest in – a strong and robust UK business with global leadership potential. We’re passing on a great business to Esterline and are confident it will continue to grow and prosper as much under their ownership as it has under ours”
“ECI has a track record of investing successfully through economic cycles. We look to invest in niche market leading companies and to work with management to realise their full potential whatever the economic environment.”
“The current climate is clearly more challenging for Private Equity generally both in buying and selling businesses. However, the sale of Racal Acoustics shows that the private equity model can continue to deliver strong business performance and good investment returns for investors even in tougher times so long as a rigorous approach to business assessment and development is followed by private equity houses with the courage of their convictions, the ability to get the right deals done in the current environment, and the skills to add genuine value to their investees”
Geof Eeles, CEO of Racal Acoustics comments:
‘Racal Acoustics has grown strongly through private equity ownership and has benefited from the excellent partnership with ECI over the last three years. In this period Racal Acoustics has delivered record revenues and has positioned itself as a global leader in the field of military ancillaries. This has been achieved through the introduction of world beating new products such as our Raptor and Frontier ranges and through increased market penetration.”
“Esterline is an excellent future partner that fully supports and encourages our continued growth strategy both organically and acquisitively and we consider ourselves a great addition to the Esterline group of companies.’