Liberty Hall Capital Partners, a US private equity (PE) firm focused on the aerospace and defence industry, is looking to further explore investment opportunities in Australia’s defence sector, said Managing Partner Rowan Taylor.

The Charleston, South Carolina-based PE firm sees the closer defence and security ties between the US and Australia as a great opportunity to invest in Australian businesses that serve the defence industry.

“We all recognize the criticality of Australia for broader security in the world, particularly in APAC,” Taylor told Mergermarket.

Australia, along with the UK and the US, in September 2021 announced an enhanced trilateral security partnership known as AUKUS, further solidifying security cooperation between the partners.

Liberty Hall currently has two portfolio companies with operations in Australia: Accurus Aerospace Corporation, which in 2022 acquired Brisbane-based components provider for military and commercial aerospace end markets Ferra Holdings, and Comply365, which earlier this year merged with UK-based Vistair that has a Brisbane operation, Taylor said. The PE firm earlier this month closed a single-asset continuation fund for Comply365, which is a global provider of compliance, safety and data intelligence technologies serving the aviation, defence and rail industries.

Liberty Hall is considering bolt-on acquisitions to expand its existing portfolio companies as well as new platform opportunities, Taylor said.

Within the aerospace and defence industry, “someone has to make the plane, finance the plane, fly the plane, maintain the plane, and otherwise serve the industry with software technology. We look to invest in businesses that do all those things other than flying the plane, so we don’t invest in airlines,” the partner explained.

The average Australian defence business is smaller than those in the US, but Liberty Hall, typically focusing on mid-market or lower mid-market opportunities, is “perfectly comfortable” with the smaller opportunities, Taylor said.

An initial investment may target a business with as small as approximately USD 5m in EBITDA, while an attractive opportunity will have the potential to accelerate growth through add-ons allowing Liberty Hall to invest additional capital, Taylor said. “We have the ability to start small and grow quickly.”

Its investment thesis centres on “fundamental transformation of mid-market or lower mid-market aerospace and defence businesses into larger and more capable and diverse strategic assets”, which, if executed well, will become attractive to strategic buyers, the partner said.

The partner is not concerned with Australia’s foreign investment regime, and their two previous investments in the country went through the FIRB approval process.

Liberty Hall has built some relationships with local intermediaries in Australia, which is helping the firm in sourcing deals, while its internal team is also looking for opportunities, he said.

Founded in 2011, Liberty Hall has so far invested more than USD 1bn in equity capital across seven platforms and 12 add-on acquisitions of businesses serving the global aerospace and defense industry. The total amount includes contributions from partners, who co-invested with the fund in those platforms, Taylor added.

Liberty Hall focuses on four segments: manufacturers and engineered products suppliers, aircraft financiers, distributors and service providers, and software and technology companies, as per its website.

Mergermarket recently reported that Australia’s PE and VC sector is heating up interest in defence deals after the government announced plans in May to increase defence spending to AUD 100bn from AUD 53bn within a decade. Local sector investors include Pemba Capital and CPE Capital.