News & Events

Bob Kipps and The Honorable Tom Ridge Share National Security Market Insights with Connecticut ACG

In a May 26, 2011 presentation to business leaders at the Connecticut Chapter of the Association for Corporate Growth (“ACG”), Bob Kipps and The Honorable Tom Ridge provided strategic insights on developments in the defense and national security industry.

Speaking about market dynamics for companies particpating in the industry, Kipps explained how modest growth expectations for defense and homeland security budgets have led to moderations in valuations for publicly-traded companies.  The impact has been particularly acute on companies with exposure to the big platforms that have been in the bullseye of recent budget cuts.  The implication for M&A activity in the sector is akin to the 80 / 20 rule – 80% of strategic buyers are chasing the 20% of companies that hold the key technologies, capabilities, and customer relationships that offer an oasis of growth.  As a result, this M&A supply / demand imbalance is maintaining premium pricing for well-positioned businesses in health care, C4ISR, intelligence and cybersecurity.

Ridge, the former Governor of Pennsylvania and the first Secretary of the U.S. Department of Homeland Security, (“DHS”) offered discerning thoughts on the status and challenges facing the country in light of recent events.  For example, on the demise of Osama Bin Laden, Ridge’s position is that “the threat of terrorism is here to stay,” although it is certain to evolve with “new faces, new sanctuaries, and new leaders.”  Some of these new faces and sanctuaries could be found even closer to home, with domestically-grown, insider threats.  Ridge observed that the biggest challenge plaguing the War on Terror is that of sharing information in a timely way among agencies with differing agendas.  The Cold War, territorial mentality has not disappeared entirely.  With respect to areas of opportunity for contractors within DHS, Ridge feels that despite enormous progress over the past several years, DHS is still relatively immature as a procurement agency.  Rather than offering complex, unproven systems to solve problems, a more efficient alternative would be to seek off-the-shelf technologies as at least a partial solution.

Bob Kipps discusses the M&A and capital markets for defense and national security companies

The Honorable Tom Ridge provides strategic insight into key national security trends