HEICO: Wencor Acquisition
Former President at Wencor
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Former President at Wencor
Interview Transcript
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Things have improved significantly. In your opinion, where will PMA growth come from in the future? Will it be from more commercial entities adopting PMA, expanding the range of parts, or something else?
The pandemic has significantly altered the supply chain environment for at least the next 18 months. OEMs, like Honeywell and GE, are struggling to deliver, stating they're still 18 months away from returning to their previous state. PMA providers, however, continue to deliver parts. They don't need to deliver tens of thousands; they only need to deliver hundreds. They can find raw materials and shops that will build these parts in small runs. Once a PMA part is approved and purchased, it resets the bar for that part, making it difficult to return to OEM prices. These parts almost become an annuity, and it's a part-by-part deal.
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Would Wencor be discouraged if, let's say, they're looking at a part but already know there's a Heico PMA? Would that discourage them?
Yes, because airlines typically won't approve a second PMA as it takes the same amount of engineering resources to get the incremental 5% or 6% they might get out of a second PMA, versus the 35% or 40% they'll get from another unique PMA. Unless there's a quality escape or a supply chain constraint, they don't typically approve a second PMA.
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Since this is a good part to segue into Wencor, could you talk about your view of Wencor, what the business was built around, and its strengths and weaknesses, in your opinion?
One thing they did better than Heico was hiring Scott Herndon to run their defense business. Wencor had a $10 million defense business for 12 years, which was steady but sleepy. After hiring Scott, they acquired ASC in Texas, which was worth $30 million, and another small company. Their distribution defense business will likely reach $100 million by the end of next year.
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