(This article is a reprint of my February 2020 blog post for Aviation International News’ AINsight series)
In the business aircraft broker community, we bandy about the word pedigree as a badge of honor. We certainly feel as an industry that value is added when the right pedigree is associated with an aircraft offering, including as fewer number of owners since new, location of operation, records kept with keen detail and completeness, who has been maintaining the aircraft, and any history of repairs. These all stack up to create the story around pedigree.
I started to think recently that pedigree needs to
be broadened when considering the overall value of a transaction. Just think
for a moment of the other direct and indirect players involved. After all, I
have always said our business is more about the people than the equipment.
So how should one begin to rate the pedigree of the
rest of the participants in a transaction? What weight would you give those
participants in a deal structure? With what willingness would you want to bring
a great client into a group of people making up the structure of the
transaction that might not be good actors? Let’s talk for a minute about the
elephant in the room: representation pedigree.
There is a phenomenon that occurs whenever
transactions get reduced due to market slowdowns. Many actors who act as
brokers and acquisition specialists begin to operate in what can look very
unprofessional and create terrible experiences for those involved, given the
seriousness of the investments. They should be handled with a seriousness that
leaves everyone in the transaction feeling it was a professional, ethical, and
Today we are internally beginning to actually rate
the representation pedigree along with the aircraft and ownership pedigree. As
we stack up aircraft to consider for a client in an acquisition project, we
give a score to who is representing the aircraft for sale.
If we know that the
character and reputation of the broker is suspect, we might very well take an
otherwise capable aircraft for consideration and footnote for our client
discussion that reluctance to approach this offering based on what we know
could complicate and even destroy a successful acquisition. We also use the
same rating system when we are approached by a broker on the buy side that
comes to us with an offer on an airplane we have to sell. Never in all my 46
years in this business have we taken this added step to identify what could be
a problem transaction, in advance of the problem, just based on the reputation
of the person or company representing the other side.
Some of the pitfalls to recognize can be a lack of
depth in knowledge of the equipment that is being represented for sale. This
occurs when the hired representative does not ever travel to the aircraft they
have for sale. They have not read the records or do not even know what records
Another giveaway of a problem transaction could be
if the other side asks our side to pay them. Making matters worse, they will
not let the requested payment amount be disclosed in a contract. One thing for
sure we know from experience is when the other side needs to be paid by our
side, they have no real relationship with their side.
And when things get tough in a deal and usually in
every deal at some point they do, that person who is not getting paid by their
side will have no benefit to the transaction to sort out the rough spots should
they occur. Is it just me or is it getting crazier out there?