Capital raise · Aerospace & Defense

Aerospace & Defense Management Fee Structuring: An Independent Sponsor's Counsel

Structuring Management Fee Structuring on aerospace and defense deals, with the structure protection and capital connectivity an independent sponsor actually needs.

EV range $15M to $200M EV EBITDA $3M to $30M Audience Independent Sponsor
The deal context

Aerospace & Defense deals in the lower middle market run a specific playbook. Management Fee Structuring is where the structure either holds or starts to leak.

The typical aerospace and defense platform sits at $15M to $200M EV with EBITDA in the $3M to $30M range. The thesis runs on tier-two or tier-three supplier consolidation with certifications as moat. Foreign LP capital can trigger CFIUS review on the cleanest of deals. Map the cap table early.

The moves

How Management Fee Structuring actually gets structured.

  1. Set the fee at 2 percent of invested capital, stepping to 1.5 percent after year three.

  2. Carve out portfolio-company services so add-on diligence is reimbursable.

  3. Allow accrual if cash flow does not support payment, with later cash catch-up.

  4. Make the fee subordinate to debt service, not to LP preferred return.

  5. In aerospace and defense, layer in ITAR / EAR registration transferred or refiled before close as part of the Management Fee Structuring workstream.

The common mistake

Pricing the fee on enterprise value instead of invested capital. EV-based fees punish you on the first add-on.

Jason's take
"The management fee pays for the firm. Underprice it and you will run a hobby, not a platform."
Jason Powell · Management Fee Structuring
Capital after close

The deal is one thing. The capital that opens up after close is another.

Capital after close is where the IRR actually gets made. The right introductions at month nine through month thirty are where this practice works as hard as it does at the LOI.

MONTH 18
Senior refi
MONTH 24
Dividend recap
MONTH 36
Growth equity
YEAR 4–5
Strategic exit
ENGAGE THE PRACTICE

Management Fee Structuring for Aerospace & Defense, on independent sponsor terms.

Independent sponsor counsel that already speaks fluent deal-by-deal economics, structures clean LPAs, and travels with capital markets relationships for what comes after close.