VSE (NASDAQ:VSEC) executives outlined a definitive agreement to acquire Precision Aviation Group (PAG) during a conference call, describing the deal as a “transformational” step intended to accelerate the company’s aviation aftermarket strategy and lift profitability over the next several years.
Deal rationale: scale, footprint, and capabilities
President and CEO John Cuomo said the acquisition is expected to “meaningfully increase” VSE’s revenue by about 50% on a pro forma basis and support a path to more than 20% consolidated adjusted EBITDA margins “over the next few years” as integration and synergies progress. Management also said the combined company expects to drive approximately $15 million in annualized synergies over the next few years.
On a combined basis, management said the company would operate 60 locations worldwide, including 47 repair facilities and 11 distribution centers of excellence.
What PAG adds to the platform
Cuomo described PAG as a global provider of aviation aftermarket MRO services, distribution, and supply chain solutions supporting commercial, business and general aviation, rotorcraft, and defense end markets.
- PAG operates 29 locations across six countries, employs about 1,000 people, and completes more than 175,000 repairs annually, according to management.
- Pro forma for PAG acquisitions completed in 2025, PAG generated approximately $615 million in adjusted revenue for the year ended Dec. 31, 2025, the company said.
- Management said PAG supports more than 10,000 active customers.
VSE said PAG’s end-market exposure is approximately 58% business and general aviation, 29% commercial, and 13% military, with about a third of the business focused on engine content. PAG’s capabilities were described as spanning component services, engine and APU services, avionics services, and proprietary solutions including DER repairs, reverse engineering alternatives, and low-rate in-house manufacturing.
Cuomo said PAG operates a “high-margin, 100% aftermarket-focused business” with adjusted EBITDA margins greater than 20% and more than 2,000 unique DER repair capabilities. In response to analyst questions, Cuomo said PAG’s proprietary solutions segment is “under 10%” of revenue and that DER repair is a primary focus within that category. He also said “reverse engineering alternatives” includes some PMA activity but also refers to bringing engineering and manufacturing capabilities in-house to support PAG’s MRO shops.
Combined company profile and synergy targets
On a pro forma basis, VSE said the combined company would employ about 2,600 people in 60 locations across eight countries. Management described the combined end-market exposure as roughly 50% business and general aviation, 45% commercial, and 5% military, with MRO accounting for about 60% of total revenue and engine-related content about 50%.
VSE said it expects to realize “over $15 million” in annualized synergies through a phased integration of operational and corporate support functions, including procurement savings, network optimization, supply chain improvements, and cross-selling and insourcing opportunities. Cuomo told analysts that the disclosed synergy target reflects items that can be “tick and tie” with detailed actions, while he expects additional upside from go-to-market and revenue opportunities that were not included in the $15 million estimate.
Transaction terms and timeline
Chief Financial Officer Adam Cohn said VSE will acquire PAG for total upfront consideration of approximately $2.025 billion, subject to customary working capital adjustments. The consideration includes:
- $1.75 billion in cash
- Approximately $275 million of equity consideration issued to GenNx360, subject to a lockup period that will expire in three equal parts at six, 12, and 18 months after closing
- Up to $125 million in contingent earnout consideration based on PAG’s 2026 adjusted EBITDA performance, payable in cash or equity at VSE’s discretion
Cohn said that inclusive of full run-rate synergies, the total upfront consideration represents approximately 13.5x PAG’s expected adjusted EBITDA for the year ended Dec. 31, 2025. The cash portion is supported by a fully committed bridge facility, and management said the transaction is expected to close in the second quarter of 2026, subject to regulatory approvals and customary closing conditions. When asked about the bridge facility’s interest rate, management said it would be “somewhat consistent” with VSE’s current debt facility but did not provide a specific rate.
Cuomo said PAG is expected to run relatively independently through the end of the calendar year after closing, and that VSE expects integration work to ramp in 2027, with planning during the “back end of the year.”
Preliminary fourth-quarter and full-year 2025 results
Alongside the acquisition announcement, VSE provided preliminary financial ranges for the fourth quarter and full year 2025. Cohn said results include approximately one week of Aero3, which closed in late December 2025.
- Revenue: approximately $290 million to $304 million for Q4 2025; approximately $1.101 billion to $1.115 billion for full year 2025
- Operating income: approximately $27 million to $34 million for Q4 2025; approximately $84 million to $91 million for full year 2025
- Adjusted EBITDA: approximately $45 million to $53 million for Q4 2025; approximately $176 million to $184 million for full year 2025
Cohn also said the company expects sequential quarterly improvement in free cash flow in Q4, resulting in positive free cash flow for full year 2025.
In closing remarks, Cuomo said the PAG transaction is expected to expand scale, diversify the capability set, increase proprietary solutions content, and strengthen VSE’s position as a partner to aviation operators. He added that he looks forward to welcoming PAG President David Mast and the broader PAG team to VSE following the expected closing.
About VSE (NASDAQ:VSEC)
VSE Corporation (NASDAQ: VSEC) is a provider of aftermarket distribution and supply chain management services serving both government and commercial markets. The company’s solutions span a wide range of industries, with particular emphasis on defense, aerospace and transportation. VSE’s core mission is to ensure mission readiness by delivering critical parts, maintenance and technical support for equipment throughout its lifecycle.
Through its Distribution Services segment, VSE sources, markets and distributes replacement parts and components for commercial truck, bus, rail and specialty vehicle applications.
