Raptor Scientific: Growth via M&A in Test & Measurement

Harris Williams recently advised Raptor Scientific, a portfolio company of L Squared Capital Partners, on its sale to TransDigm Group. Raptor Scientific is a global leader in complex test and measurement solutions for advanced defense, space, and aerospace applications. The company was founded in 2019 by L Squared and has grown considerably since then via organic growth and carefully executed strategic acquisitions.

Here, our senior bankers sit down with Sean Barrette, Partner at L Squared, to discuss the investor appeal of test and measurement businesses within aerospace and defense and the key considerations for building a leading platform via M&A in this dynamic sector. 

A Conversation With Sean Barrette, Partner at L Squared

Q: Tell us about your initial thesis for building testing and instrumentation solutions businesses in aerospace and defense. What makes this sector appealing to groups like L Squared?

Barrette: Test and measurement businesses play an important role across many industries, helping companies meet key standards and regulations for quality, health and safety, and environmental protection. They are also instrumental in enabling innovation and improving other aspects of product design and performance. We had acquired a test and measurement business in the life sciences space, and following its successful sale we were looking for new areas with the potential to build sophisticated platforms. We were looking for subsectors where innovation was occurring and where we could identify a critical mass of companies leaning into that. 

Aerospace and defense stood out for several reasons. For one thing, it’s highly fragmented: There are many founder-owned businesses in the space with leadership positions and valuable intellectual property, which are the essential ingredients for a build-and-buy strategy. We also like the space because it aligns with the trend of increasing government investment to maintain competitiveness with our global adversaries. In addition, many of these businesses are deeply embedded in major federal programs, which provides great visibility into future earnings as well as performance stability across economic conditions.

Q: How did your thesis play out in Raptor’s growth via M&A since its formation in 2019?

Barrette: Our thesis guided us as we helped Raptor add new capabilities, platforms, and customers via M&A. Raptor’s first acquisition was Space Electronics in 2019, which we bought through a Harris Williams market engagement. We loved the company’s growth potential and saw an opportunity to win share by streamlining lead times and translating lessons learned from growing other scientist-led businesses in healthcare. Our subsequent acquisition of Sensor Concepts expanded Raptor’s testing and measurement capabilities and added radar cross-section (RCS) instruments and measurement services to its portfolio.

TestVonics was another key Raptor acquisition. The company directly served the United States Department of Defense (Air Force, Navy, Coast Guard, Army, National Guard) and foreign military organizations, as well as companies in the airframe, airline, and laboratory segments. This helped make it an important vendor to many major aircraft, space, and naval platforms. The purchase of King Nutronics was also a major step, enabling Raptor to offer new and existing customers a more complete product and service offering to support the test and measurement needs of the industries served, including new maritime and Navy customers.

Harris Williams played an important role throughout this process, acting as a sounding board as we thought through the different pieces of the puzzle and how they could fit together. We said “no” to more opportunities than we said “yes” to, and the way Harris Williams acted as a strategic thought partner over the years was helpful. Your team shared information and insights to help us guide our growth strategy and ensure what we were building would ultimately resonate with prospective buyers.

Q: How did you approach sourcing high-potential acquisitions that would boost Raptor’s differentiation and growth?

Barrette: We wanted to make sure we were acquiring high-quality businesses with clear and discernable value propositions, a focus on innovation, and a clear runway for growth. We focused on high-quality niche players with very strong technical capabilities, intellectual property, and accretive financial profiles.

It was also essential that the businesses and professionals we brought into Raptor would fit well and be successful with us in the long term. We worked hard to understand the different maturity levels of each of the businesses we were acquiring in areas such as sales, HR, and finance, and how we could help them move to the next level. In many cases, these companies were very strong on the technical side but had some opportunities for growth in those non-core areas.

If you can be patient and stick to your strategy, you can find those types of businesses. The reality is that it’s a “boots-on-the-ground" grassroots effort: searching on the internet, making phone calls, sending out introductory letters, going to trade shows, and having conversations. We talked to our suppliers and customers, and we identified the other technologies or products associated with our core products. It just takes time, effort, and focus. Along the way, Harris Williams did an awesome job of staying involved: sharing market intelligence, identifying potential leads, and providing insights to help guide our growth strategy. 

Q: During the sale of Raptor, were there any moments when you second-guessed your plans?

Barrette: I distinctly remember there was a moment when we were thinking about going to market earlier in the year to avoid disruptions related to the 2024 election. The Harris Williams team listened to our concerns and factually and tactfully encouraged us to stick to the original plan. At the time, that wasn’t necessarily what we wanted to hear, but I think it dramatically changed the outcome for the better. It allowed us to keep preparing for the sale and preserve optionality, which ultimately gave us more control.

Q: Any final thoughts on the key success factors of building a great company via M&A?

Barrette: Communication is so important. Our teams stayed in close contact throughout our partnership, and we were very transparent with each other, which leads to trust. We’re also both direct and pragmatic, and unafraid of having tough conversations. The ability to solve problems together in ways that positively impact investors, employees, and customers is essential to success over the long run.

To learn more about opportunities in test and measurement businesses within aerospace and defense, please contact our senior professionals.