The Plumbing: The Funds, LPs, and Holding Companies Beh...

Built to Be Bought described what happens to a cleared government contractor: it gets built, bought, and rolled. The SEC filings showed the ownership stakes that result. This post answers the question underneath both: where does the money actually live? The answer is a stack of legal entities with dull names, and once you can see the stack, every deal in this series reads the same way. This is the plumbing, explained plainly, with the real entity names from the filings.

Three layers, not one company

A private equity firm is not a single company. It is at least three separate ones, kept apart on purpose.

At the top is the management company, the thing people mean when they say "the firm." It employs the investment professionals, and it collects the annual management fee. It persists across many funds, so the firm's knowledge and staff live here.

For each fund, the firm creates a dedicated general partner, or GP. The GP legally controls that fund, makes every decision, bears the liability, and earns the profit share. A new GP is formed for every fund.

The fund itself is a limited partnership. Its outside investors come in as limited partners, or LPs, and they are the ones who actually put up most of the money: public pension systems, university endowments, sovereign wealth funds, insurers, and family offices. The LP role is passive; LPs supply capital and their liability is capped at what they commit, but the GP decides where it goes. When you read that a defense company is "owned by" a private equity firm, what that usually means is that a retired teacher's pension fund and a state employees' retirement system supplied the cash, and the firm's general partner points it.

The three are split apart to isolate their liabilities: a lawsuit against the management company should not reach the fund's investments, and a failure at one investment should not reach the firm.

How the money is split

The firm is paid on the famous "2 and 20" template: roughly a 2 percent annual management fee on the capital, plus roughly 20 percent of the investment profits, which is the carried interest. The carry is not free money. Under the standard distribution waterfall, the LPs first get all their capital back, then a preferred return, an 8 percent hurdle that is the industry norm, then the GP takes a catch-up, and only then does the 80/20 split kick in. The general partner also commits its own capital to the fund, traditionally one to two percent, as skin in the game. That 20 percent share of the gains on billions of dollars is the number that dwarfs any salary, and it is why the people in this series work so hard to climb toward the general partner's side of the table.

Why each deal gets its own stack of shell companies

Here is the part that looks like obfuscation and is mostly engineering. A fund does not buy a company and hold the shares directly. It creates a chain of special-purpose entities to hold each one. There are three reasons, and all three are real:

Liability isolation. Each company sits inside its own limited-liability entities, so a disaster at one portfolio company cannot reach the fund or the other companies. The wall is the point.
Debt structure. The acquisition stack, often called TopCo, MidCo, and BidCo, exists so that lenders' claims are cleanly ranked. Senior lenders lend to the entity closest to the assets, junior lenders sit above them, and the fund's equity sits at the top, last in line and first to gain.
Taxes and pooling. A blocker corporation is inserted so that tax-exempt investors like pensions avoid a tax called UBTI and foreign investors avoid a tax called ECI. An aggregator vehicle pools the main fund, any parallel funds, and outside co-investors into a single owner of the company. And alongside the fund, sponsors run co-investment vehicles and structured or preferred-equity sleeves that take a priority slice of the returns.

So the boring LLC with a made-up name that shows up as the owner in an SEC filing is not hiding anything. It is the liability wall, the tax shield, and the pooling vehicle, all at once.

The worked example, in the firm's own filings

Watch the stack assemble for AE Industrial Partners, entirely from its filings. The management company is AE Industrial Partners, LP, the entity its directors assign their board pay back to. The ultimate general partner is AeroEquity GP, LLC, controlled by managing members Michael Greene and David Rowe. The funds are AE Industrial Partners Fund II, LP and its parallel funds Fund II-A and Fund II-B, plus a later Fund III, the limited partnerships that hold the pension and endowment money.

Then each portfolio company gets its own holding entity. Redwire is held through a shell called AE Red Holdings, LLC. BigBear.ai is held through BBAI Ultimate Holdings, LLC and an aggregator called AE BBAI Aggregator, LP. Firefly Aerospace is held through four vehicles named Glow NS, Glow B, Glow C, and Glow D Holdings, LLC. The preferred-stock sleeve in Redwire sits in a separate entity called AE Industrial Partners Structured Solutions I, L.P. Different names, one architecture: fund money at the bottom, a company in the middle, a general partner at the top.

Everyone builds it the same way

The tell that this is an industry template, not one firm's quirk, is that the competitors use identically shaped structures with different names.

Veritas Capital runs the largest version. It raised Fund VII at 6.5 billion dollars in 2019, Fund VIII at 10.65 billion in 2022, and Fund IX at a 14.4 billion dollar hard cap in 2025. Out of those funds it built Peraton by rolling up Harris Corporation's government IT unit for 690 million in 2017, Northrop Grumman's federal IT business for 3.4 billion in 2021, and the public company Perspecta for 7.1 billion the same year. That is the platform-and-tuck-in machine at the largest scale in the business.

Arlington Capital Partners shows the holding vehicle most clearly. It closed Fund VII at 6 billion dollars in 2025, built the defense-technology firm BlueHalo, and merged it into the public company AeroVironment in an all-stock deal valued at about 4.1 billion, completed May 2025. Arlington's rollover shares are held through SEC-named shells called Altitude V Holdings, LLC and Altitude VI Holdings, LLC, which are the exact analog of AE's AE Red Holdings and Glow Holdings entities.

The Carlyle Group took ManTech private for about 4.2 billion dollars in 2022, and did it through a BidCo named, memorably, Moose Bidco, Inc., backed by the fund Carlyle Partners VIII, L.P. GTCR built Six3 Systems and sold it to CACI for 820 million in 2013. DC Capital Partners bought a company called NISC for 19.6 million dollars and sold it to IBM for around 180 million three years later, roughly nine times its money, then rolled up four firms into Caliburn International. And the pattern keeps producing new public companies: Trive Capital built and IPO'd Karman Space and Defense in February 2025 out of seven acquisitions.

The whole thing in one sentence

Read enough of these and the plumbing collapses into a single sentence. A pension fund and an endowment put money into a limited partnership; the partnership's general partner uses a shell company to buy control of a defense contractor; the contractor is built up and taken public or sold; the proceeds flow back down the stack to the pension and the endowment, with a fifth of the gain siphoned off at the general partner's level on the way. The names on the shells change, AE Red Holdings, Altitude V, Moose Bidco, Glow C, but the machine underneath is always the same one.

Fact-check notes and sources

The three-layer structure (management company, general partner, fund limited partnership) and the passive LP role: Carta on PE fund structures, A Simple Model on the management company, Carta on the general partner, and the Harvard Law School Forum's alignment-of-interests paper.
The 2-and-20 economics, the 8 percent hurdle, the catch-up and waterfall, and the GP commitment: Carta on carried interest, the ILPA "What is Market in Fund Terms" report, Ropes and Gray on the waterfall, and Divestopedia on the GP commitment.
The per-deal holding chain (SPVs, TopCo/MidCo/BidCo, structural subordination), blocker corporations, aggregators, and co-investment: the CFA Institute on buyout mechanics, Ropes and Gray on the corporate stack, The Tax Adviser on blocker corporations, HMRC on aggregators, and Norton Rose Fulbright on co-investment.
AE Industrial's own holding entities: the AE Red Holdings, LLC and fund chain in Redwire's Schedule 13D exhibit; the BigBear.ai, Firefly, and Structured Solutions entities are named in those companies' filings as cited in the SEC-filings post.
Peer firms and funds: Veritas Capital Fund VII, Fund VIII, and Fund IX, and the Peraton roll-up (Harris IT, Northrop IT, Perspecta); Arlington Capital Fund VII and the BlueHalo/AeroVironment combination held through the Altitude V and VI Holdings SPVs; Carlyle's ManTech take-private via Moose Bidco; GTCR and Six3; DC Capital and NISC; and Trive Capital's Karman IPO.

This post is informational and journalistic, describing publicly documented structures, companies, and transactions. It is not investment, tax, legal, or M&A advice, and fund structures vary; the general descriptions here are simplified and are not a substitute for the actual fund documents or qualified counsel. All firms and companies are discussed from public sources as nominative fair use, with no affiliation implied and nothing endorsed by them.

The Plumbing: The Funds, LPs, and Holding Companies That House These Deals