26x or 18x: What a Customer Pays to Own Its Supplier

GE Aerospace announced on September 8 that it will acquire Consolidated Precision Products, a Cleveland-based maker of engineered castings, from Warburg Pincus and Berkshire Partners for $11.75 billion. GE's own release states the price two ways: roughly 18 times projected 2027 EBITDA including expected net synergies, and roughly 26 times without them. For an owner of a private company that supplies a large customer, the interesting number is not 26 or 18. It is the eight turns in between, and what they say about how a customer values a supplier it cannot do without.

What GE actually bought

CPP is not a household name, but it sits close to the center of the jet engine supply chain. It produces investment and precision sand castings in superalloys, titanium, aluminum, magnesium, and steel: the turbine blades, vanes, and structural components that operate inside an engine's hottest sections. The company has roughly 6,600 employees across more than twenty facilities and supplies parts for nearly every current-generation commercial and military aircraft program. Around 70 percent of its revenue comes from commercial and defense engines.

GE has been a CPP customer for more than fifteen years. It did not buy CPP to enter a new market or to add a product line. It bought the company because it expects demand for cast airfoils to rise more than 30 percent by 2030, and it has concluded that owning the capacity is a better bet than contracting for it. GE's chief executive framed the purchase as an investment in "mission-critical casting capacity" to support simultaneous demand from new engines, aftermarket parts, and defense programs.

That framing matters for anyone reading the multiple. A financial buyer looks at a castings business and sees a capital-intensive industrial with cyclical exposure, good margins, and long qualification cycles. It underwrites the earnings. A customer that depends on those castings sees something different: the constraint on its own production. It underwrites the bottleneck.

Where the eight turns come from

The two multiples in GE's release are not two opinions about the same thing. They describe two different assets.

The 26x figure is what GE is paying for CPP as it stands: a supplier with its own customer list, its own margins, and its own growth plan. That multiple is well above where sponsor-owned industrial businesses typically trade, and well above where Warburg and Berkshire would have marked the company in a conventional sale to another fund.

The 18x figure includes what GE expects to gain by owning the asset rather than buying from it. Some of that is ordinary cost synergy: purchasing, overhead, and duplicated functions. More of it, given the strategic rationale, is capacity and control. GE plans to apply its FLIGHT DECK operating system to CPP's plants, integrate casting design with engine design, and shorten the path from new airfoil technology to production. It also gains first call on output that its competitors currently share.

The difference between the two numbers, roughly eight turns of EBITDA, is the value GE places on securing supply. It is the price of not being the customer waiting in line.

Why sponsors held for fifteen years

The seller side of this deal is also instructive. Warburg Pincus bought CPP from Arlington Capital Partners in 2011. Berkshire Partners joined through a recapitalization in 2019, a transaction that gave Warburg partial liquidity without a full exit. That sequence, a decade and a half of sponsor ownership with a mid-hold recap, is longer than most funds intend to hold anything.

Part of the explanation is that the natural buyer was always the customer, and the customer had to decide it needed to own the asset. A supplier deeply embedded in a large customer's program has a narrow list of plausible acquirers. Other financial buyers can pay only what the earnings justify. Competitors of the customer may be blocked by qualification requirements or by the customer's own leverage. The customer itself can pay the most, but only when its supply position becomes uncomfortable enough to justify the price.

For CPP's owners, the payoff came when engine demand, aftermarket volume, and defense spending converged and GE's need for castings became a constraint on its growth. The sponsors waited for the moment when their asset stopped being a supplier and started being a bottleneck. That is a strategy, but it is a strategy that requires patience and a customer whose needs eventually outrun its alternatives.

What this means for a private supplier

Most owners reading this do not run a $12 billion castings company. But many run businesses where one customer accounts for 30, 40, or 50 percent of revenue, and many of those customers are large enough to buy the supplier outright. The GE deal is a clean illustration of how that customer thinks about value, and it points to a few things worth knowing before the conversation ever starts.

Customer concentration is a discount in one sale and a premium in another. In a sale to a financial buyer, dependence on one customer is a risk to be priced down, usually through a lower multiple, a larger escrow, or an earnout tied to the relationship surviving the transition. In a sale to that same customer, the concentration becomes the reason the buyer is at the table. The owner's job is to know which sale is actually available, and to avoid running a process designed for the first when the second is the real opportunity.

The customer's multiple is set by its own economics, not yours. GE can pay 26x because the cost of a constrained supply of airfoils, measured in delayed engine deliveries and lost aftermarket revenue, is far larger than the premium it paid. A supplier that wants to understand what its customer might pay needs to understand what its absence would cost that customer. That analysis looks nothing like a discounted cash flow of the supplier's own earnings.

Replaceability is the variable. CPP commands the price it does because qualifying a new castings source for a flight-critical engine part takes years and carries regulatory and engineering risk. A supplier that could be replaced in six months has no bottleneck value regardless of how much of its revenue comes from one customer. Owners who want to be in CPP's position should invest in the things that make switching expensive: certifications, tooling, embedded engineering relationships, and proprietary process knowledge.

What to watch next

Three things will tell you whether this deal is an outlier or the start of a pattern. First, whether other engine and airframe manufacturers respond by securing their own casting, forging, and machining sources, either through acquisition or long-term capacity agreements. Second, how the regulatory review treats a customer buying a supplier that also serves its rivals; the deal is not expected to close until the second half of 2027, and conditions attached to that approval will shape how future vertical deals get structured. Third, whether sponsors who own embedded industrial suppliers begin running processes aimed at customers rather than at other funds.

The last point is the one most relevant to a private owner. If the customer is the highest bidder for a critical supplier, the sale process that gets to the highest price looks different from a conventional auction. It starts earlier, involves fewer parties, and depends on the supplier understanding its own strategic value before the customer does.