Flexjet's Kenn Ricci says mergers are a sign of weakness

Flexjet Chairman Kenn Ricci, who built one of private aviation's largest businesses partly through acquisitions and mergers, now says he no longer advocates for M&A in the sector.

On the David Senra podcast, Ricci said he believes mergers are a sign of weakness. He questions whether companies need acquisitions to gain market share when they could instead invest the same capital in their existing businesses.

The case against mergers

Ricci, who oversees fractional Flexjet, jet card seller Sentient Jet, on-demand broker FXAir, and a host of other business aviation companies, believes companies often underestimate how hard it is to integrate different corporate cultures.

"I would tell you 90% of the time, you could probably do this yourself without the acquisition," Ricci told Senra. He argued that integrating a workforce representing 10% of existing employees might be manageable, but adding 30% or 40% makes cultural integration nearly impossible.

"Do you really need to spend 12, 10 times cash flow to grab the market?" he asked. "Would you invest that money yourself and grab the market share, or do you not have a good enough product to do it?"

Ricci's scepticism draws on his own experience. After launching Flight Options in October 1998, he generated $100 million in sales during its first three months and another $400 million the following year. However, the dot-com downturn exposed cash-flow challenges, prompting a 50/50 merger with Raytheon's fractional ownership business, Travel Air.

The merger ultimately led to Raytheon buying Ricci out in 2002. He described losing control of Flight Options as the worst day of his life.

Ricci subsequently reacquired Flight Options in December 2008, paying $15 million in cash and signing a $27 million personal note whilst assuming additional liabilities. He later acquired Flexjet from Bombardier for $180 million, beginning another lengthy integration process involving two companies with different cultures and labour relationships.

Private Jet Card Comparisons reported that Ricci was equally critical of private equity, particularly its influence on the FBO business, though the reporting does not detail those criticisms.