Vertical integration is the name of the game

One repeated logic, and an $11.75 billion casting bet that only makes sense once you stop reading it as an earnings deal.

The pattern came before the headline

Start with the sequence, because GE Aerospace buying Consolidated Precision Products is the fifth move in a pattern, not the first.

Airbus went first. It absorbed Stelia Aerospace and Premium Aerotec and folded them into Airbus Atlantic and Airbus Aerostructures across 2021 and 2022, ending an outsourcing model it had spent two decades building.

On December 8, 2025, Boeing and Airbus closed the Spirit AeroSystems break-up. Roughly 15,000 people went to Boeing along with Wichita, Tulsa, Dallas and the Belfast operations. About 4,000 went to Airbus with Kinston, Saint-Nazaire, Casablanca, Belfast and Prestwick. Spirit Defense continues separately, and CTRM took Subang. The single largest node in the commercial aerostructures supply chain ceased to exist as an independent company.

Bombardier has now done it twice. In February 2019 it took the Global 7500 wing program back from Triumph Group for nominal consideration, keeping the Red Oak, Texas line running with the same people. On September 1, 2026, it agreed to acquire the assets of MHI Canada Aerospace in Mississauga: about 750 employees and the wing and center fuselage work for the Global 5500/6500 and Challenger 3500.

Seven days after the MHICA announcement, GE Aerospace agreed to buy CPP for $11.75 billion.

Then there is the version that skips the acquisition altogether. On August 29, 2026, Elon Musk confirmed that SpaceX is building a blades and vanes foundry at Bastrop, Texas, next to its Starlink plant. We all know he favors a vertically integrated approach and in this case his argument is that casting blades and vanes is the limiting factor in gas turbine production, and that doing it in-house pulls turbines onto the grid as much as 18 months sooner.

Different tiers, different technologies, one decision repeated. When physical output gates revenue rather than orders doing it, the asset that sets output stops being a procurement line and becomes a strategic holding.

The wave this actually belongs to

Stephan Jansen's M&A textbook maps seven transaction waves since 1880, each with its own strategic logic. Monopoly building through horizontal integration until 1904. Vertical integration from 1925 to 1930. Conglomerates through the 1950s and 60s. Financial transactions and leveraged buy-outs from 1985. Shareholder value and globalization in the 1990s. Financial investors and patching in the 2000s. The current wave, dated from 2014, carries the label second global integration and IT-based integration.

None of the moves above fits that label. What this industry is running is the 1925 playbook. The motive has changed, though. The second wave was about owning a production cycle to build market power. This one is about physical throughput that money alone cannot summon.

What GE actually agreed to

$11.75 billion for CPP, bought from Warburg Pincus and Berkshire Partners. Seven billion in cash, the balance in new debt, close expected in the second half of 2027 subject to regulatory approval. CPP brings 6,600 employees across more than 20 sites, castings on LEAP, GEnx, T700, F110 and F404, and roughly 60% commercial aerospace revenue with the rest in defence, power and industrial gas turbines.

The multiple stands out, about 26x CPP's forecast 2027 EBITDA before synergies, falling to roughly 18x once the $200 million of expected net synergies are counted. Set that against aerospace and defence M&A that averaged 11.4x EV/EBITDA across 2025 and 9.5x in the first quarter of 2026, per Capstone Partners, and GE is paying close to 3x the average sector multiple.

CPP barely moves GE's numbers

CPP is expected to generate around $2.0 billion of revenue in 2027. Back out GE's own stated pre-synergy multiple and you get implied 2027 EBITDA near $450 million. GE Aerospace, meanwhile, guided full-year 2026 adjusted revenue to $42.3 billion with operating profit of $10.55 to $10.75 billion.

The largest acquisition of Larry Culp's tenure adds about a twentieth to the top line and a twenty-fifth to profit, while consuming $7 billion of cash and adding several billion of debt. A company chasing growth or accretion has cheaper ways to get both.

GE didn't acquire earnings. It acquired scarcity of a critical capability, plus control over quality and schedule.

Airfoils are the throttle on the whole system

GE expects demand for airfoils, meaning blades, vanes and shrouds, to rise more than 30% by 2030 across new engines, aftermarket and defence simultaneously. Backlog is north of $210 billion. Culp has repeated the same line all year: this is a supply-side problem, not a demand problem.

Castings are where the supply side breaks. A cooled high-pressure turbine blade is a ceramic core, a wax pattern, a vacuum pour and a yield number that nobody publishes. Scrap rates on the most complex multi-wall parts run at levels that would close a machine shop. Adding a furnace does not add output; adding a qualified, stable, capable process does, and in my experience standing up and qualifying a new hot-section casting source is a two-to-three-year exercise even when the customer is pushing hard and paying for it.

That is why the arithmetic of the multiple misses the point.

The part that matters for the next engine

Here is the angle I think is underplayed. High-pressure turbine blades are where the performance of the next generation of engines gets decided.

Open fan architectures, higher pressure ratios, higher turbine entry temperatures, ceramic matrix composites in the hot section: every one of those development lines runs through blade and vane design. Multi-wall single crystal castings, directionally solidified structures, thinner walls, more complex internal cooling. The iteration loop for a new blade is only as fast as your access to a foundry that can pour, inspect and re-pour trial geometries.

GE paid for two things: throughput on legacy platforms now, development speed on what comes after. Neither line item appears in an EBITDA multiple.

Backlog play or top-of-cycle exposure

Jansen makes one more observation worth sitting with. Every merger wave so far has ended roughly as a recession began. He is careful about the direction of causality and says the evidence does not settle whether that is correlation or autocorrelation. Two explanations compete. Either deals done at premiums that future earnings never justify help trigger the downturn, or a recession, rising rates and tighter liquidity simply stop managers from doing deals in the first place.

Apply that to a transaction signed at 26x with $4.75 billion of new debt and a close that will not happen before the second half of 2027, and you have textbook top-of-cycle exposure.

The counter-argument is specific to this asset. Demand here is backlog rather than equity-market sentiment: more than $210 billion of it at GE, with aftermarket and defence content that historically holds up better than new equipment when airlines stop ordering. Foundry capacity stays scarce in a downturn because nobody builds it in one. The premium is cyclical. The asset is not.

That is the whole bet, and it is why I would not write this off as a rich deal done late in the cycle. Judged as an equity story, 26x is indefensible. Judged as throughput on legacy platforms plus a shorter development loop on the next architecture, it may read in 2032 as the cheapest capacity GE ever bought.

How much of a threat is this insourcing approach by the OEMs to Tier 1s, really?

I personally argued that the OEMs are becoming a major competitor to the Tier 1s, however we need to have a nuanced look at what actually changed hands.

Boeing took back 737 fuselage work that Spirit had held exclusively since the 2005 spin-off and that no other supplier was ever going to be invited to bid for.

Airbus took the A350 and A220 packages Spirit already ran at Kinston, Saint-Nazaire and Belfast.

Bombardier took its own wings, twice, from the two suppliers already building them.

GE bought a casting house it had been buying from for more than fifteen years. In each case the work was already locked to a single source. No Tier 1 lost a competition it could have won, and no accessible market disappeared.

There is an argument that traffic moves the other way. Those Spirit sites carried work for customers other than the OEM that bought them, and a Boeing-owned or Airbus-owned plant is an awkward home for a competitor's parts. Some of that content will probably get re-sourced, and the natural destination is the independent Tier 1 base. The same logic applies to CPP's non-GE volumes if the merchant model slips.

The market these OEMs are integrating into is not a fixed pie either. Single-aisle ramp rates, widebody recovery, a $1.5 trillion FY2027 US defence budget request, space, and industrial gas turbine demand driven by data centre power, which is what put SpaceX in the foundry business, are all pulling on the same pool of superalloy castings, forgings, and NADCAP-approved special processes at the same time. I have not seen a period where every segment ran hot simultaneously the way it does now.

The read-across for everyone else

For a Tier 1 or Tier 2 supplier, this pattern poses an uncomfortable but useful question. Are you a capacity line item or a capability position?

A capacity line item can be dual-sourced, in-sourced, or priced down the moment the constraint eases. A capability position, meaning a certified process, a proven yield curve, engineering content the customer cannot replicate, is the thing that gets bought at 26x rather than squeezed at renewal. Warburg Pincus held CPP for fifteen years and built exactly that. The exit speaks for itself.

The question underneath all of it

Strip these moves down and none of them was really a debate about price. Each one came down to scarcity versus abundance of a critical capability, plus who controls quality and schedule.

Airbus and Boeing concluded that large aerostructures had become scarce enough, and their exposure to someone else's quality escapes severe enough, that the work had to come home. Bombardier reached the same conclusion about the wings on their highest-value jets. GE concluded that hot-section casting is the scarcest capability in aerospace and that a supplier's schedule is a poor substitute for its own.

That test works in both directions, which is what makes it useful on the supplier's side of the table. If your capability is abundant and the customer sets your schedule and audits your quality, you are a capacity line item, and the multiple will say so. If your capability is scarce and you carry the customer's schedule and quality risk, you own something that is expensive to replace and expensive to buy. CPP was the second kind, and $11.75 billion is what that was worth in September 2026.