Shortly after buying Hartzell Aviation, new owner Arcline Investment Management has increased prices for parts across the board, in some cases by more than double. Arcline, a Nashville-based private equity firm, took over Hartzell in mid-November and published a new price list on Dec. 8 with some dramatic price increases. For instance, a Sky-Tec starter that used to sell for $484 without a core requirement now sells for $1,295 with a return core required, according to one shop. A propeller blade that cost $7,284 before the acquisition is now $10,964, a 51% increase. Maintenance shops have no option but to pass the increases on to customers, and some said they were concerned that competitors McCauley and MT would follow suit with price increases of their own. Hartzell did not immediately respond to AVweb phone calls and emails for comment.
Arcline was founded in 2018 by Rajeev Amara, a 1997 graduate of the Wharton School. Before launching Arcline, he spent 18 years in management positions with Golden Gate Capital, a San Francisco private equity firm that currently lists cumulative capital commitments of greater than $12 billion. Arcline is listed as holding $8.9 billion in cumulative capital commitments as of June 2023.
Hartzell Aviation represents a three-tier corporate umbrella established in July 2022 including Hartzell Propeller, Hartzell Aerospace Welding and Hartzell Engine Tech, which collectively oversaw acquired companies that built or supplied engine-related components. Acquisitions over the past few years have included lightweight aircraft starter manufacturer Sky-Tec and, in November 2023, Kelly Aero LLC, which manufactures aftermarket general aviation magnetos, replacement parts and ignition harnesses.
I’m not surprised.
Thank you Wall Street. When have private equity funded industry consolidations benefited the consumer?
Private equity firms are not Wall Street. They can be, but Wall Street is not to blame for this, the owner(s) of those firms are responsible for this.
More and more reason to go experimental. And more margin for small prop shops.
A good reason not to go bankrupt like Van’s.
In my opinion, Hartzell’s new owner, Arcline, wants to recoup its acquisition costs quickly by raising prices, hoping to make more money even if it sells fewer parts. However, it’s a risky move as it is likely to cause a domino effect, stimulating the competition to either match pricing or stay just below to draw customers away from Hartzell. It’s a gamble that could pay off handsomely or backfire. Time will tell. Either way, customers pay the price.
At least the money is staying in the US and not going overseas to some large government owned Chinese conglomerate.
Have you ever invested in the shares of US corporations listed on US stock exchanges. If you have, you might have seen how little cheating and share price manipulation there is for them nice US companies.
Not necessarily. Foreigners can buy stocks.
And invest in Private Equity firms.
This just screams “market opportunity” for the competition. With modern CNC equipment, making a propeller has never been easier. I’ve been thinking of trying this for years. Now I have a real reason to do it, at a cost lower than their past prices. Nothing ventured, nothing gained.
… and that is how the market is supposed to work. Build a better mouse trap at a lesser price point. Go for it. You will never regret your efforts regardless of outcome.
What competition? If your aircraft is certified for a certain part then you need that part. The R&D and regulatory hurdles for certification and STC approval for a new prop will be quite high. And if you are an existing company with all the tooling in place why not just raise the price on your existing products rather than wade into the morass that is new certified AC parts.
Aviation’s own Martin Shkreli…hopefully they tank.
Or Eddie Lampert. Some claim he mismanaged Sears, the original Amazon, but he was very effective at looting it. If they tank, they’ll bring GA down a measurable distance with them.
We all know that investment bankers are heavily into quality control. Maybe the Wharton grad can make less expensive door plugs that don’t fall out.
This reminds of the “Pharma-bro” fellow Martin Shkreli, who formed a company, bought a drug and rise the price thousand sof times its previous price, making it unffordable for many while knowing there was no other substitute. Nice.
Investors like Arcline take full interest in making profits while not caring a whit about the adverse effects of jacking the price up.
I say, don’t buy Hartzell products and be vocal about it.
If you can, just say no and find another company who isn’t practicing theft to keep their stock owners more well-heeled than Madonna’s show shoes.
I agree to go find a cheaper option, but it’s not always that easy. If your airplane already has their parts installed, you still need to get them serviced. Even experimentals use Hartzell props and Skytech starters.
This is so typical of the private equity industry. It’s all about the money and nothing else, no matter what line they say about making the business viable. It’s all BS.
I wonder how this will affect the guys waiting for props from Vans.
Another cause and affect = the slow death of GA.
FBO are doing this across the country. Signature is a perfect example.
Mom and pop FBO are being bought out. Similar to Harley Davidson. Replaced by mega or multi stores.
Get ready for another low hour year of log book entries…
The GA industry started their slow death with loose fasteners resulting in mega $ lawsuits 40 years ago. Eventually the Chinese may try do do it right ? On the other hand noise, pollution concerns etc. etc. will consign humanity to jail like communities for minimal environmental impact?
The next (or perhaps, first) step in the PE playbook is to load the acquisition debt into the acquired company (Hartzell) and then pay only the interest while skimming the profits to pay off the syndicate investors as quickly as possible. This debt load will strangle Hartzell’s ability to innovate and result in the eventual bankruptcy of the company. Can you say “Goodfellas”?
we saw this coming. this is standard operating procedure for these companies. unfortunately, there is not a lot of competition to force them to be reasonable. many aircraft parts are a monopoly the thus the need to be regulated like other monopiles. but the system is designed to support the campaigns of the politicians that will not regulate these kinds of abuses of the market system.
why can Europe can supply better medical care at a lower cost than the US? they have the dreaded government oversite. s
Capitalism at its finest! I’ll not fork out one cent to hartzell! Maybe I’ll take up hang gliding! Don’t need no stinking prop!😂
More justification why the current administration disapproves all mergers and acquisitions. It’s almost always bad for the consumer.
Sorry, but I’m not following your logic here. If the current administration, as you put it, disapproves all M&A’s, then why would they allow this one to go through? In reality, the Securities and Exchange Commission, a quasi-government entity like the Federal Reserve, regulates M&A activity between publicly traded companies, not the White House or its current resident. Their oversight is to review such deals as Jet Blue trying to buy out its competition (Spirit Airlines) to consolidate the market, which, in their judgement, would be bad for the consumer. Investment groups buying private companies has been going on for decades and is only slightly regulated. Since this is a company that is “investing” in Hartzell without lowering competition, the feds rarely intervene. Is it bad for the consumer, as you say? Of course it is!! Especially because, as others have said, we only have a limited ability to change propellers to another brand unless there is an STC allowing it to be done. But don’t blame the “current administration” for something over which they have no control.
…to the surprise of absolutely no one.
To be fair, Arcline closed on the purchase of Hartzell at the very tail end of 2023. Hartzell typically adjusts prices annually, so some of these price increases were going to happen no matter what. Some are perhaps a little less upstanding.
Please don’t take this as me defending Arcline, as I firmly believe this sale is overall a bad deal for the smaller end of aviation.
Save your money. They will sell out for pennies on the dollar when they too discover that there’s no money to be made in general aviation.
Built on Honor, Destroyed by Greed.
Corporate buyout recipe
1. Make competent/conscientious employees’ lives hell on earth so they quit
2. Borrow as much money as possible against the company
3. Break it up & sell it off
I hear folks comment that they plan not to buy Hartzell out of protest. Unless you KNOW that you are buying new/old stock, you probably ought to avoid buying simply for safety sake.
If you do not get compensated for cost plus inherent risk, a product, or, service will not be provided. Regulation, or, no regulation, it doesn’t matter. It is what it is. Get over it.
“suck it up”? sort of a cop out.
this is clearly a situation of extortion, taking advantage of the customer/market rather than bringing a needed product/service
to the market. I hope that this venture kills Hartzell and it’s new owners and that the employees are scooped up by the competition.
Anyone know if the deal was under scrutiny of the DOD or FTC? A Reuters article states “Arcline’s investors are mainly university endowments, sovereign wealth funds, family offices and charitable foundations.”
China has the worlds second largest sovereign wealth funds behind Norway. Is it corporate greed or PRC tampering?
Might be worth a look.