L Squared Capital Partners of Newport Beach sees a consolidation opportunity in a corner of the defense and aerospace industry. Â
The private equity firm, which primarily invests in tech-related businesses, has funded a holding company, Raptor Scientific LLC, with $60 million to bring together several small businesses that provide mission-critical material testing and measurement for high-tech products including satellites and military weapons.
“There’s a lot of these small, aerospace and defense-focused businesses that are available,” L Squared partner Sean Barrette told the Business Journal.
“It’s largely because of just the aging demographics. They’re typically still founder-owned and operated. There’s not a logical person in the business to take it over.”
Raptor’s first acquisition was Space Electronics LLC of Berlin, Conn., a provider of precision measurement and testing of physical attributes of mechanical parts, known as mass properties, used in unmanned aerial vehicles, satellites, commercial aerospace, military aviation and defense weapons systems. The company also handles testing of electronic circuits.
Raptor made the acquisition of the Connecticut company this month. Terms of the deal were undisclosed.
5 to 10 Co. Portfolio
“There are enough targets where we could put those together and build a significantly larger business, and also invest in sales and marketing with new management teams,” Barrette said, estimating there are five to 10 companies suitable for the firm’s “aggressive M&A strategy” initially projected to last for five years.
“We committed $60 million initially and we think that will fund the strategy,” he said. “We are committed to adding additional equity to the platform if needed.”
He said that the sector is lucrative due to the critical role the companies play in aerospace and defense development, adding that most of the companies make the technical instruments and perform the testing.
 “We’ve got an active pipeline of other deals that are in process and will be acquired by Raptor,” Barrette said. Â
“We’ve been looking at testing and measurement businesses for a long time now.”
CEO Hire Planned
L Squared and Raptor Scientific plan to add additional resources to the platform post-closing, including the addition of a new CEO for Raptor to lead the M&A strategy, as well as additional sales and marketing resources both domestically and in key international markets.  Â
“Raptor Scientific is the entity that’s going to bring these businesses together under a common name,” he said.
The holding company, also based in Newport Beach, was founded by L Squared this year.
L Squared, which boasts a “unique investor base of family offices,” focuses on industrial technology, tech-enabled business services and software and education technology.
Barrette said the firm has eight employees in Orange County.
