KippsDeSanto’s DealView — Top 10 M&A Deals of the Quarter

KippsDeSanto & Co., a leading aerospace / defense and government technology solutions investment bank, would like to share its thoughts on the “Top 10 M&A Deals of the Quarter” for the period ended March 31, 2019.  The following table is our take on the most notable announced M&A transactions — not only based on size, but also on strategic importance and / or impact.

 The aerospace and defense deal of the quarter is the acquisition of Endeavor Robotic Holdings, Inc. (“Endeavor”) by FLIR systems, Inc. (“FLIR”) from private equity firm, Arlington Capital Partners, for an estimated $385 million in cash.  Based outside Boston and formerly known as iRobot Defense & Security, Endeavor has shipped more than 7,000 unmanned ground vehicles (“UGV”) to customers in over 55 countries.  Endeavor provides battle-tested, tactical UGVs for the global military, public safety, and critical infrastructure markets.  This transaction, along with FLIR’s recent acquisitions of Aeryon Labs and PROX Dynamics, has significantly expanded FLIR’s unmanned systems capabilities and aligns with its evolution from sensors to intelligent sensing and ultimately integrated solutions.  Upon closing of the acquisition, Endeavor will be part of the FLIR Government and Defense Business Unit’s Unmanned Systems and Integrated Solutions division.  The transaction is expected to be $0.03 dilutive to FLIR’s 2019 adjusted earnings per share, due to borrowing costs associated with funding the transaction, but accretive thereafter.

The government technology solutions deal of the quarter is ManTech, Inc.’s (NASDAQ:MANT) acquisition of Kforce Government Solutions, Inc. (“KGS”), a subsidiary of Kforce, Inc. (NASDAQ:KFRC).  KGS provides high-end technology and business consulting solutions aimed at improving mission effectiveness and operational efficiencies for Federal customers, primarily at the Department of Veteran Affairs (“VA”) and Department of Defense (“DoD”).  The $115 million all cash transaction was announced on March 1st.  This acquisition significantly expands ManTech’s footprint at the VA and gives ManTech access to KGS’ prime position on the VA’s 10-year, $22.3 billion, Transformation Twenty-One Total Technology Next Generation (“T4NG”) Indefinite Delivery Indefinite Quantity (“IDIQ”) program.  KGS adds ~500 skilled employees and ~$100 million of annual revenue to ManTech.  This transaction is yet another example of strategic buyers paying premium valuations for well positioned businesses that hold key contract vehicles, like T4NG.  KippsDeSanto & Co. acted as the exclusive financial advisor to KGS on this transaction.

Click to access KippsDeSanto’s 2019 Aerospace/Defense & Government Services M&A Survey

About KippsDeSanto & Co KippsDeSanto & Co. is the largest independent investment banking firm exclusively focused on serving leading, growth-oriented Aerospace/Defense, Government Services and Technology companies.  We are focused on delivering exceptional M&A and Financing transaction results to our clients via leveraging our scale, creativity and industry experience.  We help market leaders realize their full strategic value.  Having advised on over 100 industry transactions, KippsDeSanto is recognized for our analytical rigor, market insight and broad industry relationships.  There’s no substitute for experience.  For more information, visit www.kippsdesanto.com.

 

KippsDeSanto’s DealView – Top 10 M&A Deals of the Quarter

KippsDeSanto & Co., a leading aerospace / defense and government technology solutions investment bank, would like to share its thoughts on the “Top 10 M&A Deals of the Quarter” for the period ended December 31, 2018.  The following table is our take on the most notable announced M&A transactions — not only based on size, but also on strategic importance and / or impact.

Of the above transactions, the following were especially noteworthy:

 The aerospace and defense deal of the quarter is the all stock merger of equals between Harris Corporation (“Harris”) and L3 Technologies, Inc. (“L3”).  Harris and L3 provide a wide array of defense technology-based solutions for global mission-critical challenges.  The combined entity will have a market cap of approximately $30 billion and the deal was announced on October 14th.  Under the terms of the deal, L3 shareholders will receive a fixed exchange ratio of 1.3 shares of Harris common stock for each share of L3 common stock.  The merged company will generate an estimated $16 billion in revenue next year, effectively forming a sixth defense prime contractor.  Strategic benefits of the merger include increased scale with a well-balanced portfolio of complementary franchises, shared culture of innovation and operating philosophies, and meaningful value creation through complementary markets and enhanced global presence.  The transaction is expected to close in mid-year 2019, pending regulatory approval from the Department of Defense.

The government technology solutions deal of the quarter is Maximus, Inc.’s (NYSE:MMS) acquisition of General Dynamics Information Technology’s (“GDIT”) Citizen Engagement Center (“CEC”).  The approximately $400 million all cash transaction was announced on October 9th and closed November 16th.  GDIT’s CEC specializes in call center support for citizens in their dealings with federal agencies, such as the CMS and the Census Bureau.  This acquisition strengthens Maximus’ position in the administration of federal government programs and bolsters the contractor’s ability to provide improved citizen services.  The CEC business will likely add between $600 million and $625 million in FY19 revenue to Maximus’ top line, with anticipated mid-single digit operating margins.  GDIT’s divestiture of its call center business follows the August sale of its Navy Systems Engineering and Acquisition Services Business Unit, acquired as part of its $9.7 billion acquisition of CSRA, Inc.  This transaction is another example of larger acquirers executing on portfolio shaping activities following consolidation and mega-mergers.

Click to access KippsDeSanto’s 2019 Aerospace/Defense & Government Services M&A Survey

About KippsDeSanto & Co KippsDeSanto & Co. is the largest independent investment banking firm exclusively focused on serving leading, growth-oriented Aerospace/Defense, Government Services and Technology companies.  We are focused on delivering exceptional M&A and Financing transaction results to our clients via leveraging our scale, creativity and industry experience.  We help market leaders realize their full strategic value.  Having advised on over 100 industry transactions, KippsDeSanto is recognized for our analytical rigor, market insight and broad industry relationships.  There’s no substitute for experience.  For more information, visit www.kippsdesanto.com.

KippsDeSanto’s DealView – Top 10 M&A Deals of the Quarter

KippsDeSanto & Co., a leading aerospace / defense and government technology solutions investment bank, would like to share its thoughts on the “Top 10 M&A Deals of the Quarter” for the period ended
June 30, 2018. The following table is our take on the most notable announced M&A transactions — not only based on size, but also on strategic importance and / or impact.

Click here to download the table above 

Of the above transactions, the following were especially noteworthy:

The aerospace / defense deal of the quarter is Boeing Co.’s acquisition of KLX, Inc. (NASDAQ:KLXI). KLX primarily provides aerospace fasteners, consumables, and logistics services worldwide through its
Aerospace Solutions Group, which generated 90% of total sales in its most recent fiscal year. KLX’s Energy Services Group made up the remaining 10% of revenue, and Boeing plans to divest the business unit
before closing the deal. The transaction values the Aerospace Solutions Group at a multiple of 15.7x LTM.

(1) KippsDeSanto & Company is not affiliated with any other company mentioned herein
(2) Source: KLX Press Release on May 1, 2018

EBITDA(2) for FY2017 and values the entire business at $4.2 billion, representing 14.7x LTM EBITDA. KLX will operate as part of Boeing’s expanding aircraft services business, Boeing Global Services, and will be
fully integrated with Boeing’s parts subsidiary, Aviall. The acquisition continues Boeing’s strategic push into the highly profitable aftermarket and MRO sector, as Boeing continues to make acquisitions along its
vertical supply chain. The transaction is expected to generate $70 million in cost-savings by 2021, and Boeing plans to finance the acquisition through a combination of cash on hand and $1.0 billion of net
debt.

The government technology solutions deal of the quarter is SOS International’s (“SOSi”) acquisition of STG Inc. The approximately $83 million all cash transaction closed on April 11th. The deal took place
approximately one year after STG’s failed transaction with Preferred Systems Solutions, and nearly five months after STG’s parent company, STG Group, was taken over by creditors. This marks the third and
largest acquisition in three years for SOSi, the Reston-based government services integrator, which also acquired Defense Group Inc., in September 2017, and New World Solutions, in January 2016. STG expands
SOSi’s capabilities across mission-critical technology, cyber, and data solutions. SOSi, with the addition of STG, now has 1,300 employees worldwide. STG also holds the Alliant 2 and Eagle II contracts, among
others, that provide SOSi with an ability to expand its customer base and pursue previously unavailable opportunities. This transaction highlights continued consolidation and capability expansion strategies
amongst mid-tier firms. Moreover, SOSi showcased deal ingenuity in its ability to navigate the complicated ownership and creditor dynamics of STG. As a result of this deal, the SOSi / STG combination
establishes a highly formidable mid-sized IT player with enhanced IT capabilities and footprint.

Click here to access KippsDeSanto’s 2018 Aerospace/Defense & Government Services M&A Survey

About KippsDeSanto & Co.: KippsDeSanto & Co. is an investment bank focused on delivering exceptional results for leading, growth-oriented aerospace / defense and technology companies. We leverage our
creativity and industry experience to provide M&A, private financing and strategic consulting. Capitalizing on real-time industry trends and in-depth technical and strategic analysis, our solutions-driven approach
is highly structured and uniquely tailored to each client. KippsDeSanto is recognized for its market insight and broad industry relationships. We help market leaders realize their full strategic value. KippsDeSanto,
member FINRA/SIPC, is not affiliated with other companies mentioned herein. For more information, visit www.kippsdesanto.com.

KippsDeSanto’s DealView — Top 10 M&A Deals of the Quarter

 KippsDeSanto & Co., a leading aerospace / defense and government technology solutions investment bank, would like to share its thoughts on the “Top 10 M&A Deals of the Quarter” for the period ended March 31, 2018.  The following table is our take on the most notable announced M&A transactions — not only based on size, but also on strategic importance and / or impact.

Click here to download the table above

Of the above transactions, the following were especially noteworthy:

The aerospace / defense deal of the quarter is TransDigm Group’s acquisition of Extant Aerospace.  The proposed acquisition is worth $525 million, or more than 6x fiscal year 2018E pro-forma revenue.  Aircraft aftermarket sales are expected to drive 80% of Extant’s 2018E revenue, with a majority of revenue derived from the military end-market.  The company licenses or acquires aftermarket products form aerospace and defense original equipment manufacturers, and then provides maintenance and support for these products throughout the rest of its useful life.  Extant support various military aircraft platforms such as the F-16, AH064, F-18, F-15, and C-130.  Its commercial platforms include the King Air series, MD 900 / 902, B747, B757, and B777 as well as various business jets.  TransDigm expects the acquisition to provide significant opportunities for growth and believes that Extant’s unique business model will be a natural fit within its aftermarket-focused value generation strategy.  TransDigm plans to finance the acquisition through a combination of cash on hand and its existing revolving credit facility.

The government technology solutions deal of the quarter is General Dynamics’ (“GD”) announced acquisition of CSRA.  The proposed transaction is worth approximately $9.9 billion, or 11.7x LTM EBITDA.  Recently, GD increased its original February 12th offer of $40.75 per share to $41.25 after CACI made a counter bid on March 18th for $44 per share in cash and stock.  GD ultimately prevailed in the bidding war because its offer was all cash, unlike that of CACI’s, which consisted of cash and stock.  CACI’s stock traded down approximately 7% the week after their counter-offer was made public, making its offer less compelling given the stock component.  The deal highlights sector buyers’ continued focus on increasing scale and next-generation IT (“NGIT”) capabilities via M&A.  Following the acquisition, GD’s federal IT business will generate nearly $10 billion per year in revenue.  This will make GD the second largest government contractor, slightly behind $10.6 billion Leidos, which became the largest government IT and services contractor through its merger with the former Lockheed Martin IT business in 2016.  General Dynamics and CSRA have received clearance from anti-trust officials, and the deal is expected to close in the first half of this year.

(1)       KippsDeSanto & Company is not affiliated with any other company mentioned herein

KippsDeSanto’s DealView — Top 10 M&A Deals of the Quarter

KippsDeSanto & Co., a leading aerospace / defense and government technology solutions investment bank, would like to share its thoughts on the “Top 10 M&A Deals of the Quarter” for the period ended December 31, 2017.  The following table is our take on the most notable announced M&A transactions — not only based on size, but also on strategic importance and / or impact.

Click here to download the table above

Of the above transactions, the following were especially noteworthy:

The aerospace and defense (“A&D”) deal of the quarter is Mercury’s announced acquisition of Themis Computer, Inc.  The proposed acquisition is an all cash deal worth $180 million, in excess of 3x 2017E revenue and approximately 14x 2017E EBITDA.  The deal is expected to be immediately accretive to Mercury’s earnings and will be financed through Mercury’s existing revolving credit facility.  Themis Computer is a leading designer, manufacturer, and integrator of commercial, SWaP-optimized rugged servers, computers, and storage systems that serve some of the largest Navy and Army server programs in the U.S. Department of Defense (“DoD”) as well as international defense programs.  The acquisition will provide Mercury with a strategic platform acquisition that will enable Mercury to continue penetrating the Command, Control, Communications, Computers, and Intelligence (“C4I”) market and provide important new capabilities for its customers.

The government technology solutions deal of the quarter is the announced merger between DXC Technology’s U.S. Public Sector (“USPS”) business, Vencore Holding Corporation, and KeyPoint Government Solutions.  DXC Technology was formed in April 2017, through the merger of Hewlett Packard’s Enterprise Services division and what remained of Computer Sciences Corporation, following the spinoff of its government services business to SRA International, which became CSRA Inc.  Vencore is a provider of information solutions, engineering, and analysis to the U.S. Intelligence Community, the Department of Defense, and federal and civilian agencies worldwide, and KeyPoint is a provider of specialized investigative and risk mitigation services to the U.S. Federal Government.  DXC is spinning off its USPS business to combine it with Vencore and KeyPoint to create a competitive, large-scale, government-focused IT services provider.  The proposed transaction will be tax-free to DXC and its shareholders through a Reverse Morris Trust transaction structure, which is the same structure used for the formation of DXC as well as Leidos’ acquisition of Lockheed Martin’s IT business in 2016.  The DXC USPS deal is expected to close by March 31, 2018, and the still-unnamed, public, combined entity will have 14,000 employees and ~$4.3 billion in annual revenue.  DXC shareholders will own 86% of the combined business and receive $1.05 billion of cash upon closing.  Veritas Capital, the prominent private equity firm that owns both Vencore and KeyPoint, will retain approximately 14% of the combined entity’s equity and receive $400 million of cash at closing.  This transaction follows the recent trend of mega-mergers (~$1 billion in revenue) across the government technology solutions landscape and is the third of its kind behind CACI’s acquisition of L-3’s NSS business unit and Leidos’ acquisition of Lockheed Martin’s IT business.