8M Aerospace Deal… 95% Customer Concentration. Buy or Run?

In this episode of Acquisitions Anonymous, hosts Michael Gridley and Heather discuss a high-margin aerospace parts distributor deal with guest Brian Kibisa, a former Air Force aircraft maintenance technician turned search fund candidate. The business, generating $8.2M in revenue and $1.9M in adjusted EBITDA, operates with a 95% customer concentration across five international defense and aerospace manufacturers—primarily export-focused, with strong compliance infrastructure and recurring demand due to military maintenance schedules. Despite red flags like no SBA eligibility and a long cash conversion cycle from inventory-heavy operations, the team highlights the business’s exceptional 25% profit margin, low customer churn, and high switching costs that lock in buyers. Brian expresses strong interest, noting the niche appeal and growth potential through expanded international outreach, while the hosts debate whether the extreme concentration is a fatal flaw or a manageable risk in a regulated, high-stakes industry. The episode concludes with a strong endorsement for due diligence, especially around inventory verification and geopolitical exposure. Key takeaways include: 1) High customer concentration in regulated industries can be sustainable if switching costs are prohibitive; 2) Export-focused distributors may qualify for enhanced SBA loan guarantees (up to 90%); 3) A long cash conversion cycle requires significant working capital; 4) Inventory diligence is critical and costly in aerospace distribution; 5) Growth hinges on penetrating new international markets through RFQs and procurement research; 6) The business model thrives on predictability, not volume; 7) Political risk is real but mitigated by long-term system lifespans; 8) This deal is binary—either a home run or a disaster, with no middle ground.