'Colossal opportunity' ahead in aerospace investing: Former Air Canada CEO
Brookfield Asset Management Inc. is adding another big name to its ranks, appointing former Air Canada Chief Executive Officer Calin Rovinescu as a senior adviser as it hunts for deals in the aerospace industry.
Rovinescu, who retired last month from his role at Air Canada, will advise Brookfield and its private equity arm on global investments, including in the aviation and aerospace sectors, a new area of interest for the alternative asset manager, the company said Monday in a statement.
Cyrus Madon, chief executive officer of Brookfield’s private equity group, said Brookfield has been studying aviation-related industries and believes there is a multibillion-dollar opportunity in the sector. Rovinescu’s experience and network after almost 12 years at the helm of Canada’s largest airline will help guide Brookfield’s foray into the sector, he said.
“Our view is that in the immediate future, the supply chain in aerospace has been deeply disrupted, and that is going to present numerous opportunities over the next couple of years,” Madon said in an interview. “We’ll be looking for the same type of characteristics in aerospace as we do the rest of our business: market leaders providing essential services, and a strong barrier to entry.”
Beyond his airline experience, Rovinescu will draw on his background in restructuring and mergers as a lawyer with Stikeman Elliott and as a co-founder of Genuity Capital Markets, now Canaccord Genuity Group Inc.
Even though the aerospace and aviation sectors are cyclical, Rovinescu said, they will help drive the economy as the world rebounds from the COVID-19 pandemic. There are opportunities all along the supply chain, he said, including parts-making, maintenance, services that are performed in airports, and even owning airports themselves -- an area that might be of interest for the infrastructure group at Brookfield.
“It’s sort of a similar dynamic to what we’ve seen following the last cycle,” Rovinescu said in an interview. “When you go back to 2008, you see the value that has been created in so many businesses since the global financial crisis. I see 2020, as horrific as it’s been and as devastating as it’s been for these industries, I think it’s an amazing opportunity over the next decade.”
Rovinescu is the latest big name to join Brookfield, which has more than US$600 billion in assets under management. In August, the firm announced it had hired former Bank of England Governor Mark Carney to lead its ambitious push into environmental and social investing.
Rovinescu said he took the role after concluding that at age 65, he no longer wanted to be a full-time CEO. He has served on the board of BCE Inc. for the last few years, recently joined the board of the Bank of Nova Scotia and said he’s been approached by other firms as well.
“The Brookfield story has been remarkable success story over the past two decades, and I’m delighted to have my name associated with theirs as we try to build out some of these businesses,” he said.
Brookfield’s private equity group has had a successful run over the past five years, nearly quadrupling its assets under management to US$72 billion. Its private equity funds from 2007 to 2019 had a gross internal rate of return of 28 per cent, according to a recent company presentation.
Madon said the majority of its US$9 billion private equity flagship fund is invested. Brookfield typically begins fundraising for the next fund after an existing flagship fund is 75 per cent allocated.
Madon said the landscape for private equity remains competitive. The resurgence of special purpose acquisition companies, known as SPACs, has added to competition for deals. But it has also created a potential opportunity to exit some existing investments, he said.
One advantage Brookfield has now is its size, Madon said, which allows it to buy global companies that are leaders in their sectors and attract top talent, like Rovinescu, to their ranks.
“It has always been competitive,” Madon said. “The number of firms that can write a multibillion check for a particular investment is limited. It’s been a benefit becoming larger and global.”