Moelis Expands Aviation Portfolio

Target: Mxi Technologies

Price: >$100 million

Sponsor: Moelis Capital Partners

Seller: Mxi Technologies

Financial Adviser: Sponsor: Moelis & Co., JetCapital, The Avascent Group, Sagence Group

Legal Adviser: Sponsor: Parr Brown Gee & Loveless; Osler, Hoskin & Harcourt LLP

Mxi, based in Ottawa, Ontario, provides software to airlines, original equipment manufacturers, the military and military defense contractors to manage aircraft maintenance. The idea is to give these companies an efficient way to keep aircraft safe while complying with regulations. Like many software companies, Mxi offers fairly predictable revenues as customers enter long-term contracts with the companies.

“It’s an important long-term decision and once implemented the customer is likely to use it for many years,” Jim Johnson, a principal with Moelis Capital, told Buyouts.

Moreover, the company is in a sector that Moelis Capital and a few other firms are quite bullish on. In December, Moelis Capital invested in Flightstar Aircraft Services LLC, a provider of maintenance services to air carriers, cargo companies and other aircraft operators. And in January, Hawthorne Global Aviation Services, an entity Moelis Capital formed with fixed-base operations manager Hawthorne Corp. two months earlier, bought ExcelAire LLC, an aircraft charter and management company.

“We firmly believe that the number of aircraft in the world will go up, the complexity of aircraft will continue to evolve and there will be a need for solutions to drive cost efficiencies and ensure regulatory compliance,” Johnson said.

Another firm bullish on aviation is Graycliff Partners LP, which closed two deals in the sector in April, most recently buying Skandia Inc., a maker of flame-retardant foam and flammability testing services to business jet manufacturers. And in May, Court Square Capital Partners bought PRV Aerospace LLC, a supplier of components and other products used by aircraft manufacturers, from Platte River Ventures.

As these deals suggest, the aircraft market appears to have some wind at its back, no pun intended.

Aerospace and defense titan Honeywell International forecast that deliveries of private jets, for example, would rise 3 percent to 5 percent in 2012. And aviation electronics company Rockwell Collins reported that sales to business and regional aviation manufacturers increased 19 percent in the fourth quarter. The business jet industry “appears positioned to begin another period of expansion in 2012,” Honeywell said in a recent outlook report on the industry, according to Reuters.

Moelis Capital is the investment arm of boutique investment bank Moelis & Co. LLC, founded in 2007 by former UBS Investment Bank President Ken Moelis. The firm manages $700 million of committed capital and typically invests $20 million to $60 million in its deals.