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July 8, 2024

Amid recent job cuts, newly private Kaman Corp. bets on new technology for future growth

HBJ PHOTO | SKYLER FRAZER Kaman Corp. CEO Ian Walsh recently sat down with the Hartford Business Journal to discuss the Bloomfield-based manufacturer’s future.
Contributed Kaman’s next-generation of heavy-lift vehicles, the unmanned KARGO UAV, had their first test flight in December.

Just a few months after going private, Bloomfield-based Kaman Corp. is focusing on new technology while beginning to explore business opportunities with subsidiaries of its new parent company, private equity firm Arcline Investment Management L.P.

Kaman Corp. CEO Ian Walsh — head of the historic Connecticut manufacturer founded in 1945 by the late aeronautical engineer, business executive and philanthropist Charles H. Kaman — said Arcline executives have spent the last few months visiting the company’s numerous sites, and doing more in-depth “deep dives” into its product lines and programs.

“We’re 99.99% aligned on where we’re trying to get to, versus a company coming in and saying ‘no, you’re gonna go left or right, or shift directions,’” Walsh said. “That is the first question all the time: Are they going to change strategy to the business? The answer is, no. They know exactly what we’re trying to do and are going to help us get there faster.”

Kaman has gone through many changes throughout its history, including, at one point, making and selling Ovation guitars and other musical instruments to fulfill Charles Kaman’s guitar-enthusiast dreams. But perhaps the most significant, modern shift is becoming a private equity-owned company.

Arcline closed its $1.8 billion purchase of the formerly publicly traded Kaman in April. Walsh recently sat down with the Hartford Business Journal for the first time since the Arcline deal was first announced in January.

If you ask Walsh, the deal was several years in the making. Arcline took a stake in Kaman in the summer of 2023, and several months later came to Walsh with a proposal to join forces.

The two companies have a history. Arcline was one of the bidders for California-based Bal Seal Engineering Inc. in 2020, before Kaman ultimately purchased the precision seals and springs maker for $330 million. Both companies were also final bidders for Ohio-based Parker-Hannifin Corp.’s aircraft wheel and brake division, which Kaman bought in 2022 for $440 million. Kaman was also previously interested in acquiring certain businesses owned by Arcline.

“Arcline is a new company — they’ve been around for more than five years — and they’ve done a marvelous job of scaling their businesses,” said Walsh, sitting behind his desk, casually-dressed in a Kaman-logo embroidered navy blue, short-sleeve polo shirt. “So, at the end of the day, what’s interesting is we had assets they wanted and they had assets we wanted. … I think things happen for a reason.”

However, private equity acquisitions often come with cost-cutting, a reality Walsh said he knows and understands.

The Harvard MBA grad and former U.S. Marine Corps officer said Kaman has shed some corporate and administrative staff — about a dozen employees — since being absorbed by Arcline.

He said additional corporate cuts are being finalized — Kaman employed just below 1,000 people in the state as of May. However, the long-term plan is to grow the business.

“We’ve already taken actions because there are certain capabilities and functions that we just don’t need anymore as a private company,” he said.

Private equity impact

Arcline, which has offices in New York, Nashville and San Francisco, was founded in 2018 by CEO Rajeev Amara, who was previously a managing director at private equity giant Golden Gate Capital.

As of mid-January, the company said it had roughly $8.9 billion in cumulative capital commitments. But it’s been active in the M&A market since then. In addition to buying Kaman, it reached an agreement in May to sell one of its portfolio companies, Nashville electric infrastructure services provider Voltyx.

Arcline still lists nearly two dozen businesses in its portfolio, including numerous aerospace and defense companies, like Rhode Island-based electronic components maker Quantic, and engineered components manufacturers like Qnnect, based in Boston.

The Kaman deal came after the Bloomfield manufacturer spent the past few years undergoing a major restructuring to focus on new products, like its unmanned aerial vehicle technology, and away from its long-established joint fuze program it supported through U.S. military contracts. At its peak, the joint fuze program accounted for one-third of Kaman’s annual profit, but the company wasn’t selected to make the next generation of fuzes.

Kaman makes a variety of proprietary parts and components for the aerospace, defense, medical and industrial markets. Its engineered products division, for example, makes aircraft bearings and springs, while its precision products unit focuses on helicopter work. It also makes medical device components.

Kaman is developing the KARGO UAV, an unmanned aerial vehicle that can lift loads of up to 800 pounds.

In the last few decades, Kaman was perhaps best-known for its heavy-lift K-MAX manned helicopter, which has been used by the U.S. military. Kaman is discontinuing production of those copters, instead opting to focus time and energy on its next-generation of heavy-lift vehicles, the unmanned KARGO UAV, which had their first test flight in December.

Another test flight, to be conducted with the U.S. Marine Corps., is scheduled for this month.

Walsh said the KARGO UAV has potential across a plethora of U.S. military and commercial markets, and the focus of the new technology hasn’t ceased since Arcline got involved.

He said Arcline aims to be an “extension” of Kaman rather than come in and control the company’s everyday operations.

“I think what makes this partnership very unique and special is that everything that they’re working with us to do are the things that we were already working on,” Walsh said. “They’re allowing us to move much quicker and much faster in a private setting, which is really what being a private company is all about.”

So, why go private? Well, now in year four of its five-year transformation effort since Walsh took over as CEO, Kaman was at a crossroads, the chief executive said.

“As we’re marching towards that effort (to transform and refocus the company), we also recognized the fact that we had, at our size and scale, major sources of variation (within the business). And that, as a publicly traded company, is something that you need to avoid,” Walsh said.

By variation, he meant old business units that needed to be phased out — like the joint fuze program, which has left a revenue hole in Kaman’s income statement — and the need to invest in new technology that will hopefully open future revenue streams.

Walsh said Kaman is also in the process of identifying companies to potentially acquire later this year and next. Specifically, the company is looking to add to its engineered products business, which Walsh said has significant growth potential.

The CEO said his team has also been looking at Arcline’s existing portfolio of manufacturers, such as Ohio-based Hartzell Propeller, which makes aircraft propeller systems, for potential business opportunities and sharing of best practices.

Connecticut commitment

Walsh said he believes the overall “business energy” in Connecticut is getting better, and he appreciates the state’s attempts to connect with the business community through groups like the Connecticut Business & Industry Association.

He said Kaman’s footprint in the state is important, and future Arcline acquisitions could mean Kaman grows locally.

“Connecticut continues to work hard to make it a more economically attractive state to be in, but I think, as we’ve all acknowledged, there’s a lot of work to do,” Walsh said.

Paul Lavoie, the state’s chief manufacturing officer, has tried to ensure communications between the state and Kaman remain ongoing.

Lavoie said his office, AdvanceCT and the state Office of Workforce Strategy have met with Walsh and other Kaman leaders to discuss future workforce development initiatives “to make sure that they have the workforce that they need to continue to grow here in Connecticut.”

Connecticut officials plan to have another meeting with Walsh this month, Lavoie said.

“We are deeply engaged with Kaman around making sure that they have access to all of the workforce development tools in the state of Connecticut to make sure that they continue to grow here as well,” Lavoie said. “They know the state of Connecticut wants them to be here, wants them to grow here, and is willing to do whatever we can to support it.”

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