Madison Air Solutions Corporation M&A announcement

Please go ahead. Great. Drew, thank you.

Good morning, everyone, and thank you for joining us today on relatively short notice. Joining me today are Jill Wyant, President and Chief Executive Officer, and J.J. Foley, Chief Financial Officer. Jill will begin with the strategic rationale of the transaction and an overview of ebm-papst. J.J. will then walk through the transaction terms, financial impact, synergy opportunity, and our deleveraging plan. Jill will close with the key takeaways before we open the call up for Q&A. Before we begin, I would like to remind everyone that certain statements on this call are forward-looking in nature and are subject to risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, please see Madison Air's recent SEC filings. We undertake no obligation to update these statements as a result of new information or future events.

We will also refer to certain other non-GAAP financial measures. You can find calculations and a reconciliation of these measures to the most closely comparable GAAP measures in the press release and presentation accompanying this call, and in the supplemental information as applicable, which can be found in the investor relations section of our website at madisonair.com. With that, I will turn the call over to Jill.

Thank you, Steve. Good morning, everyone, and thank you for joining us today. I will start on slide 3. Today is an important day for Madison Air. We have signed an agreement to acquire ebm-papst, a company we have known, respected, and worked with for many years. We believe this is a rare opportunity to synergistically bring together two highly complementary businesses with outstanding technology, deep customer relationships, and a shared commitment to innovation and engineering excellence. At Madison Air, our strategy is built around three core strengths that work together to deliver better air, stronger customer outcomes, and attractive long-term returns. The first is return on air, our approach to helping customers achieve important business outcomes across mission-critical environments. The second is leadership in attractive growth markets, where air directly impacts performance, reliability, efficiency, and productivity.

The third is our unique value creation model, designed to deliver sustainable, profitable growth and strong cash flow. We believe ebm-papst strengthens all three. Its differentiated integrated airflow technology further strengthens our return on air capabilities. It broadens our ability to scale in mission-critical applications and attractive growth markets. It gives us another strong platform where we can apply our commercial capabilities, operating discipline, and 80/20 approach to accelerate value creation. In short, this transaction is an acceleration of what we planned and communicated we would do. ebm-papst is highly aligned with who we are, where we compete, and how we create value. Please turn to slide 4. This slide shows the repeatable framework we use to create value. We focus on resilient end markets with structural tailwinds.

We work to outperform those markets through return on air, our approach to helping customers achieve better business outcomes through better air, differentiated innovation, value-based solutions, and trusted partnerships. We drive performance through Madison Air Execution Excellence, or MAX, powered by 80/20, and we allocate capital with discipline, investing in our people, organic growth, and targeted M&A where we see a compelling strategic fit and attractive returns. We have achieved strong organic growth while expanding our platform by successfully investing approximately $8 billion in M&A investments over time. Our approach has been very consistent. Add differentiated technology, further strengthen our channel and customer positions, expand capabilities in attractive end markets, and then apply our operating model to compound growth and cash flow. ebm-papst is a top acquisition priority for us because it aligns exceptionally well with our approach.

As a long-standing customer, we know the business well and have a deep appreciation for ebm-papst technology, custom and semi-custom engineering expertise, innovation, and customer focus. We also have great respect for the people and culture that have driven its success. Please turn to slide 5, which highlights the ways in which we believe ebm-papst advances our strategy and drives value creation. First, ebm-papst extends our ability to deliver return on air, helping customers achieve better business outcomes through better air. Its high-performance integrated airflow technology helps improve efficiency, performance, reliability, and lifecycle economics in demanding applications where air directly impacts results. Integrated fans are the enabler. Fans are the enabler of nearly every airflow system we serve and are often a limiting factor in overall system performance, efficiency, and cost. As a result, better fans and integrated system design translate into tangible return on air outcomes.

While a fan typically accounts for less than 10% of upfront system capital cost, energy consumption represents up to 80% of total cost of ownership over the life of the system, creating significant opportunities to improve customer outcomes. Reliability for our customers is absolutely essential. If airflow or air quality is an issue in a customer's hospital, semiconductor fabrication facility, data center, or advanced manufacturing facility, it means downtime and millions of dollars at risk. Better fans enable tangible return on air outcomes for customers. Second, the technology is highly complementary to our capabilities. ebm-papst is a pioneer in integrated electronically commutated, or EC, fan and motor systems. EC fans combine highly efficient motors with intelligent controls to automatically adjust airflow based on demand, delivering precise, reliable, energy-efficient performance at lower noise levels.

We believe the EC fan market is growing because it benefits from several durable secular trends: energy efficiency, increasingly stringent regulations, smart building adoption, and the need for reliable airflow in mission-critical environments. ebm-papst brings industry-leading EC fan technology, while Madison Air brings deep application expertise. Together, we believe we can help customers solve complex air quality and energy efficiency challenges and create better outcomes through highly engineered custom and semi-custom solutions. Third, the combination makes us an even stronger partner to leading customers, including global OEMs. ebm-papst products are specified early in the HVACR design process, and like Madison Air, they've built trusted relationships in demanding environments. Together, we believe we can engage earlier, partner more strategically with customers on innovation, and support them more completely across the product lifecycle, from design to replacement and aftermarket support. Fourth, it expands our customer sales opportunities in multiple ways.

The transaction nearly doubles our addressable market, adds a large installed base, and almost doubles our direct channel presence. We also see significant opportunities to accelerate growth through cross-selling, aftermarket expansion, and the greater scale of our combined go-to-market capabilities.