Airport Authority: The “X” Factor when Selling Your FBO

Position Yourself to Succeed

When it comes to the business of selling your FBO or General Aviation business, there is one undeniable fact; the Airport Authority can be your best friend and ally, or your worst nightmare in this important process. In almost every FBO or GA business sale transaction; I call them the “X” Factor because your Airport Authority (City Council, County Commission or other governing entity) can make or break your attempt to sell your business. Make no mistake; you must account for them early in the process as you begin to formulate the strategy for selling your business. Across this country, FBO acquisition and sale deals are either approved or denied every day because of the power held by the Airport Authority and management personnel.

Here’s Why: In most cases, the Lease and/or Operating Agreements between the Airport and the FBO or other General Aviation business will give the Airport Authority the right to review, approve and/or disapprove the business’ sale. Most Agreements specify that such acquisition will necessitate the transfer of the business’ Airport Lease and/or Operating Agreement to the buyer at closing. This is true for the vast majority of FBOs and General Aviation businesses at public airports across the country.

If such is your case, this is definitely an area in which you must be mentally and politically proactive, especially if your relationship with your Airport’s management and governing authority is strained or there are issues with the existing lease (term, covenants, rates, reversion, etc.). When it comes to dealing with your Airport Authority about the sale of your FBO or General Aviation business, you must place your company, yourself, and your Buyer in a Position to Succeed with them.

Here’s what you must do:

Step 1: Review your Governing Documents

No matter what the political atmosphere may be for your situation, no matter what the tenor of your relationship is with Airport management or Board members; the first step in the Airport arena is to identify what your situation is from a contractual standpoint.

Airport Lease & Operating Agreement: Carefully review your Airport Lease and Operating Agreement to find the terms, conditions, provisions, and/or covenants that control and are associated with or may impact your rights to sell the business and/or transfer the lease to a new owner.

Airport Minimum Standards and Rules & Regulations: Carefully review your Airport’s Minimum Standards and Rules & Regulations documents to see if there are any covenants that would be specific to your Buyer, and which would give the Airport control over, or rights to accept or deny them. Commonly, there may be restrictions that require minimum industry background/experience, a requirement to demonstrate a minimum level of financial capability, or a clause that prohibits absentee ownership.

Previous RFP Requirements: If your business was developed because you were originally selected via a Request for Proposal (“RFP”), you may have been required to submit a business plan and/or documentation that demonstrated your industry experience and/or long-term financial capabilities prior to your selection. Such covenants or conditions may transfer to your Buyer as well, and if such conditions or covenants existed then, you can be certain your Airport Authority may remember and consider enacting them again.

Step 2: It’s All about Them. Put yourself in the Airport’s Position.

Essentially, you need to be proactive in determining what the best course of action will be in order to receive approval from your Airport Authority for your business’ sale in the shortest amount of time. In the majority of cases I’ve dealt with over the years, one thing stands out; it is critically important to know what the members of your Airport’s management and governing board will expect to see from you, what they will want to hear from you and your buyer, how they plan to react, and how well you cover your bases with respect to acknowledging their role in the process.

Assuming that your Airport Board or management’s approval will be required, here are some guidelines for dealing with the process.

Venue: Determine what venue will be required for the approval process. Will it be as simple as obtaining a signature from the Airport Board Chairman or Airport Manager, or does the sale and transfer of your business require a more involved process that includes one or more Airport Board or City Council meetings in view of the public?

Timing: In any case, you must determine the time-line for the airport approval process. This may impact your plans for the date of closing. Whereas a simple signature may the only requirement; the process of approval associated with Airport Board or City Council meetings may stretch from a few weeks to several months. This timing and time-line can be tied to several things:

Meeting Scheduling: In most cases, your Airport’s Board or City Council meetings are regularly scheduled events which occur on a given day and week each month. It is imperative to plan well in advance (1 to 2 months) for any action that will affect the approval process, and ultimately, the sale and closing.
Agenda Scheduling: In most cases, your Airport’s Board or City Council meetings operate on an agenda. Therefore, it is important to know whether there is a deadline for agenda items, including the sale of your aviation business. I’ve witnessed circumstances in which the deadline for an approval meeting date was missed literally by hours and the result was a delay of 1 to 2 months.
Holiday Scheduling: Are your Airport’s Board or City Council meetings subject to cancellation at certain times of the year when there are conflicts with holidays like Thanksgiving and Christmas or July 4th? Do Board or Council members’ vacations affect meeting schedules during the summer? These may be a consideration to account for early in the process.

Presentation: Referring back to Step 1 in this process, sooner or later you’ll discover what, if any information will be required for submission and/or presentation to the Board. The level of complexity can range from a simple explanation of the circumstances, timing, and introduction of your Buyer, to a full-blown presentation that communicates the buyer’s background, experience, and business plan to members of the airport’s management, board members, and interested members of the airport’s aviation community.

If the latter scenario is likely the case; it is important to plan for this once a Purchase/Sale Agreement has been executed and the due diligence phase begins. It should be you and your Buyer’s collective goal to develop a tight, informative, and iron-clad presentation in a verbal, written, and/or audio visual format. Once again, timing can be an issue, depending upon the complexity of the presentation. In and of itself, this process can take from a few short weeks to months. (See Step 3, below).

When to Tell Them: Sooner or later, there is a critical point in the sale of the business when it becomes necessary for you inform your Airport’s management of the impending sale of your aviation business. At the point when you are relatively certain that there are no stumbling blocks or issues that will delay or derail the acquisition you should plan to inform the Airport Manager and/or a trusted Airport Board member, as soon as possible.

Step 3: Be Prepared for “The Presentation Process

If, in fact, you’ve determined that some sort of public or private presentation to Airport Management and Board Members or City Council will be necessary, it is imperative to plan for the event early-on in the process. When it comes to Airport Board meetings in which you are scheduled to present your buyer’s plan for the acquisition and transition of your business; here are a few simple guidelines that experience has taught us:

What Objections will be Raised and Presented Against You or Your Buyer: Make absolutely certain that you know about any and all issues that may be raised in opposition to the sale of your business or toward your buyer. Prepare extensively for your presentation and any arguments in favor of your position. I cannot overemphasize the importance of preparation for this event. Even if it turns out to be a non-issue, preparation for any opposition is critical to your success. Know your rights and be prepared to present them.

Identify your Opponents: If you’ve been operating on the Airport for any length of time, this should be an easy one. Give your Buyer the benefit of your experience.

Identify your Supporters: Encourage them to speak on your (or your Buyer’s) behalf if it becomes necessary.

Use Experienced Aviation Expert(s): In some cases, the best defense is a good offense. In our case, we routinely present to airport boards and/or management on behalf of our clients, using case history and our experience at other airports.

One last piece of advice: No matter what your situation or relationship with the Airport may have been in the past, it may not make any difference if you find yourself faced with a fair amount of adversity when it comes to selling your business. If your Airport Board is in fact the “Wild Card” in the process; don’t be afraid to seek professional advice and assistance for yourself and your Buyer. And, if necessary, consult an aviation professional or consulting that is familiar with airport leases, and the FAA’s approach to general aviation businesses and minimum standards and is comfortable dealing with Airport Boards or City Council on FBO matters.