Industry Week in Review – May 8, 2015
Aerospace & Defense Update
Commercial applications of unmanned aerial vehicles (“UAVs” or “drones”) were among the highlights at this past week’s annual AUVSI conference in Atlanta, Georgia. Venture investors continue to plow money into commercial UAVs businesses (noted by Accel Ventures’ investment this week of $75 million into Chinese drone firm DJI, valuing DJI at ~$8 billion). These commercial enterprises have a variety of business models, from the sale of airframes, to maintenance / training / support, to an end-to-end solutions that offer data-as-a-service. Meanwhile, larger, established UAV players that heretofore have focused on the military end market (Boeing, Aerovironment, many others) have made a notable effort to leverage their existing technologies to address demand in other industry verticals, from infrastructure to mineral exploration to agriculture. All of this investment and attention have placed greater focus on the gatekeeper to the National Airspace System – the FAA – to both implement and execute upon a strategy for the safe and efficient deployment of UAVs.
The U.S. and Japan agreed upon new military guidelines to strengthen ties between the two countries and build Japan’s global presence. The update outlines major changes to Japan’s military structure in order to fortify its defense and protect itself and its neighboring allies against potential aggression from North Korea and China. This suggests that Japan will be able to deploy missile defense systems with the sole purpose of protecting allies including the U.S. if weapons are launched with the intent of injuring those countries. As a follow-up to the agreement, the U.S. State Department approved a multi-billion dollar weapon sale to Japan for 17 V-22B Block C Osprey and a package of accessories. The island nation has already agreed to purchase the Global Hawk unmanned system and may consider additional anti-missile systems going forward.
Government Technology Solutions Update
The Office of Management and Budget (“OMB”) released guidance to agencies this week for the GFY2017 Federal budget. The report suggests Federal agencies should plan for a 5% cut from their discretionary budget compared to levels laid out in the President’s GFY2016 budget proposal. However, the OMB also detailed priority areas for investment despite the anticipated decline in the broader budget. Included in these categories were: (i) data-driven management reviews; (ii) digital service teams; (iii) solutions to reduce the Federal real property footprint; and (iv) shared service capabilities migration. The OMB continues to push for an end to sequestration and cost cutting in more “commonsense” ways, such as the closing of tax loopholes, to fund priority areas.
The U.S. Navy announced a five-year cyber strategic plan this week to build up defenses and in-house skills within the Fleet Cyber Command. The plan is centered around five priorities to turn the U.S. Navy cyber network into a more offensive “warfighting” platform with intelligence and remediation capabilities by 2020. In the categories of leadership, operational excellence, agility, transparency, accountability, and partnership, the Fleet Cyber Command has set 18 month milestones for each. These benchmarks will be used to provide quantifiable markers of progress in evolving cyber capabilities to become both a weapons and defense system. The Fleet Cyber Command’s plan also focuses on building the cyber workforce as the U.S. Navy is responsible for creating 40 of the 133 teams that will ultimately make up the U.S. Cyber Command’s Cyber Mission Force.
Big Movers
Huntington Ingalls Industries, Inc. (Down 11.4%) – Shares were down this week after the Company released earnings for the first quarter of 2015. Profit dropped as oil and gas companies cancelled or deferred projects and the Company announced it will lay off 30% of its workforce.
Triumph Group Inc. (Up 11.5%) – Shares were up this week after the company reported first quarter revenue of $1,080.3 billion, up 15.4% from the same period last year.
Transactions
Pacific Architects and Engineers Incorporated has entered into a definitive agreement to acquire A-T Solutions, Inc., a provider of training and identity operations solutions, full lifecycle forensic and biometric support, and identification and analysis of asymmetric threats. Terms of the deal were not disclosed.
Seabury Enterprise Solutions, LLC acquired Aero Transport Engineering Consulting S.A., a provider of integrated and flexible maintenance, repair, and overhaul software solutions for the aerospace industry. Terms of the deal were not disclosed.
Industrial Growth Partners acquired FMH Aerospace Corp., a producer of highly-engineered components and assemblies for the commercial aerospace, defense, space, and industrial sectors. Terms of the deal were not disclosed.
Information Innovators Inc. (“Triple-I”) acquired Creative Computing Solutions, Inc. (“CCSi”), a provider of cyber security, health services, and program management support to Federal agencies. Terms of the deal were not disclosed.
Constellis Group to merge with Olive Group, a provider of innovative risk management solutions, which include security, program management, life support, and technology solutions, to blue chip commercial customers operating primarily in the energy, aviation, and infrastructure sectors. Terms of the deal were not disclosed.
Transom Capital Group acquired Critigen, a full-lifecycle geospatial systems integrator driving business performance through spatial IT solutions. Terms of the deal were not disclosed.
