GE Aerospace spent $11.75 billion to buy Consolidated Precision Products from Warburg Pincus and Berkshire Partners. The company makes castings. These are metal parts shaped by pouring molten metal into molds. GE Aerospace needs them for jet engines. They decided paying a supplier forever costs more than just buying the supplier.
This is called vertical integration. Business schools teach it in week three. Henry Ford did it in 1927. GE Aerospace cracked the code in 2024.
Warburg Pincus and Berkshire Partners bought Consolidated Precision Products in pieces over several years. They bolted together castings companies. Then they sold the whole thing to their largest customer for nearly twelve billion dollars. Private equity firms call this value creation. Everyone else calls it buying something and selling it for more.
Retail traders will read this headline and think it means something about aerospace sector consolidation trends. They will check the GE Aerospace chart. They will notice it moved half a percent. They will draw three trendlines and a Fibonacci retracement. They will post about supply chain resilience on Twitter. The stock will close exactly where it opened because nobody who moves markets gives a sh*t about castings suppliers.
GE Aerospace now owns the company that makes the parts they were buying anyway. They will pay themselves for the parts instead of paying Warburg Pincus. The parts will cost the same. The metal will be the same temperature. The molds will be the same shape. But now GE Aerospace owns the molds.
Somewhere a CFO is explaining to shareholders why spending twelve billion dollars to eliminate the middleman creates shareholder value. The presentation has forty slides. Thirty-nine of them are about synergies.
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