Industry Week in Review – November 14, 2014

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Aerospace & Defense Update

CFM International reached 100 hours of flight testing for its Leap 1C engine on the Boeing 747.  The turbofan engine is designed for the Comac C919 narrowbody and features new, lighter weight pylons that improve performance and decrease operating costs.  The engine is strategically positioned to fulfill the current demand to reduce component weight, increase reliability, and improve efficiency seen throughout the commercial aerospace industry.  Through its joint venture with GE Aviation, CFM will continue testing with its integrated propulsion system.  The engine is up for initial certification in 2015 and will be integrated into the Airbus A320neo and Boeing 737 Max with its Leap 1A and 1B variants.  CFM has already collected orders for the Leap 1A variant from China’s Zhejiang Loong Airlines to supply nine A320neos.

The A-10 Warthog has a strong backing from Republicans to keep the fleet alive.  In particular, Senator John McCain has vocalized his avid support for the fleet and will make it a priority item as he takes on his expected new role as Senate Armed Services Committee Chairman.  Defense of the program follows the Air Force move to shut down three A-10 squadrons, which equates to about 72 aircraft.  The aircraft continues to be a favorite among ground troops as its accuracy and power are unparalleled in comparison to any current aircraft.  McCain cited a June friendly fire accident involving a B-1 bomber that killed five American troops as a major reason to keep the A-10 as the B-1 simply could not replace the close-air support.  However, the A-10 fleet may lead to further delays of the F-35 as it withholds maintenance personnel that could have been allocated to the F-35 fleet.

Government Technology Solutions Update

The Department of Defense is expected to release an updated cloud policy to speed up the procurement process in the next week.  Currently, all DoD cloud contracts are passed through the Defense Information Systems Agency (“DISA”).  However, the new policy will decentralize cloud procurement and give individual agencies purchasing power for approved commercial cloud services.  DISA will no longer be the only contracting office for DoD cloud contracts, but it will give input on cloud security to other agencies.  With the faster procurement process, the DoD will be looking to increase the number of cloud contractors.

Veterans Affairs (“VA”) Secretary Bob McDonald announced the reorganization of the VA this week.  The announced plan ensures Veteran needs are more easily met and VA employees are better equipped with the products and services to meet those needs.  The VA will be establishing a new VA-wide customer service organization, a single regional framework, and a national Community Veteran Advisory Council.  Additionally, the reorganization will realign the VA’s internal structure and processes in order to better leverage shared service frameworks.  This announced restructuring is the largest the VA has undergone since its establishment.

Big Movers

KeyW Holding Corporation (Up 8.3%) – Shares were up this week after the Company announced that it has been awarded a $17 million prime contract with the Air Force Research Laboratory to develop and transition next generation ISR sensor systems.

Taser International, Inc. (Up 9.0%) – Shares were up this week after the Company announced multiple large quantity weapons orders, including a one from Virginia’s Langley Air Force Base, which bought 259 X26s Smart Weapons with 20 Taser cam recorders.

Relevant Transactions

Exchange Income Corporation to acquire Provincial Aerospace Ltd., a provider of airborne and maritime surveillance solutions for industrial, military, and government markets.  The deal is worth an estimated $246 million.

Harbert Private Equity Fund III, L.P. acquires Flight Display Systems Avionics Corp., a designer, developer, and light manufacturer of cabin electronics for business and commercial aircraft, including cabin management systems and in-flight entertainment solutions, and ruggedized special mission military monitors and other retrofit solutions requiring adherence to military specifications.  Terms of the deal were not disclosed.

Fort Sill Apache Industries acquired Advanced Information Services Inc., a provider of consulting services for companies with product data management and enterprise document management software.  Terms of the deal were not disclosed.

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Industry Week in Review – November 7, 2014

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Aerospace & Defense Update

In mid-term elections on Tuesday, November 4th, Republicans gained the Senate majority and strengthened their majority in the House of Representatives.  Specifically, Republicans replaced Democratic Senate incumbents in Arkansas, North Carolina, Iowa, Colorado, South Dakota, West Virginia, Montana, and Alaska.  Moreover, Republicans gained control of governor’s mansions in a number of states previously held by the Democratic Party including Arkansas, Illinois, Maryland, and Massachusetts.   Republican’s success in the mid-term elections will likely hinder President Obama’s legislative agenda over the course of his next two years in office.  However, shortly after the election results were released, President Obama noted that the 113th Congress’ next two months will be critical.  During the lame duck session, lawmakers will address a spending measure to fund the government for the next calendar year as the 2015 Continuing Resolution is set to expire on December 11th.  Additionally, the President indicated that he intends to send this Congress a resolution to formally approve U.S. strikes against the Islamic State of Iraq and the Levant (“ISIL”) through an update to the authorization for the use of military force.  The current Congress is also expected to receive a Presidential request for more than $6 billion directed towards containing and eliminating the Ebola outbreak.

China Aircraft Leasing Group announced an initial agreement to purchase 100 Airbus planes, valued at approximately $10.2 billion.  The deal, which is expected to be finalized before the end of the year, includes 74 of the A320neo aircraft, 16 of the current-generation A320ceo model, and 10 of the A321ceo.  The provisional order comes in response to China’s established position as the world’s fastest growing aviation market, along with the expectation that it will overtake the United States as the busiest market for domestic air travel within the next decade.  As Asian air traffic continues to grow, aircraft leasing firms seek to capitalize on the increase in aircraft demand amongst Chinese airlines.  Specifically, BOC Aviation became one of Airbus’s top ten customers after placing an order for two additional A320ceo aircraft in October, bringing the aircraft lessors total order count to 257.

Government Technology Solutions Update

Senate and House lawmakers have reached agreement on the Federal IT Acquisition Reform Act (“FITARA”) bringing the bill close to passage.  The bill seeks to grant agency chief information officers a more significant role in IT decisions, requires an IT investment portfolio review process for agencies, and lays the foundation for managing intricate Federal IT projects.  FITARA will likely be attached to the GFY2015 National Defense Authorization bill.  However, the Senate and House armed services committees must also sign off before it reaches the President for signing.

NASA’s $20 million Solutions for Enterprise-Wide Procurement V (“SEWP V”) contract for product based IT, network, and audio-visual solutions faces 17 filed protests.  The amount of protests is not expected to increase significantly as companies only have a ten-day window to file protests after agency debriefings.  NASA now has 30 days to respond to filed protests by issuing corrective actions or fighting protests through the Government Accountability Office (“GAO”).  Corrective actions would lead to the quickest resolution, while going through the bid protest decision process would delay SEWP V even further.

Big Movers

Kratos Defense & Security Solutions, Inc. (Down 16.4%) – Shares were down this week after the Company announced third quarter earnings.  Quarterly revenue of $217 million missed estimates of $244 million, while net loss for the period came in at $11.1 million.

Rheinmetall AG (Down 9.2%) – Shares were down this week after the Company reduced its earnings guidance from a range of $250 million – $274 million to roughly $188 million.

Relevant Transactions

Sheltair Aviation Services LLC acquired FlightLevel Aviation Lakeland at Lakeland Linder Regional Airport (“KLAL”), a provider of aviation fuel and ground handling services.  Terms of the deal were not disclosed.

Teradyne, Inc. acquired Avionics Interface Technologies, Inc., a provider of flight simulation models, databus analyzers, and support systems to the aerospace and defense markets.  Terms of the deal were not disclosed.

Optex Systems Holdings, Inc. acquired L-3 Communications Corporation’s Applied Optics Center, a provider of laser protection filters and precision optical assemblies.  Terms of the deal were not disclosed.

Raytheon acquired Blackbird Technologies, a provider of persistent surveillance, secure tactical communications, and cybersecurity solutions to the Intelligence Community (“IC”), and special operations market.  The deal is worth approximately $420 million.

Bridge Growth Partners to acquire CRGT, a provider of custom software development and data analytics to Federal Government agencies.  CRGT is a portfolio company of Veritas Capital.  Terms of the deal were not disclosed.

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Industry Week in Review – October 31, 2014

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Aerospace & Defense Update

On the evening of Tuesday, October 28th, an unmanned Orbital Sciences Corp. rocket carrying cargo for the international space station endured a catastrophic failure moments after liftoff.  Although there were no injuries, launch facilities suffered significant damage.  The explosion will likely ground the Antares rocket for at least a few months as the National Aeronautics and Space Administration and the Company analyze and fix associated problems.  Insurance is expected to cover a portion of damages on the $200 million rocket and capsule and the Company will maintain its financial guidance for the rest of the year.  CEO, David Thompson, does not expect the failure to slow the planned merger with Alliant Techsystems, Inc. however, it is still too early to decide whether to delay the planned December 9th shareholder vote regarding the deal or take further time to review long-term financials.  Expectations for close date have already been pushed to early 2015 due to regulatory approvals.

Lockheed Martin announced a $4.55 billion agreement with the U.S. Department of Defense to build its eighth batch of F-35 jets.  The Company will build 43 additional jets at a 3.6% lower average cost than under previous contracts.  This order includes 29 U.S. aircraft, 19 of which are F-35As, six are F-35Bs, and four are F-35Cs the remaining aircraft are F-35As intended for foreign partner nations including Israel, Japan, Norway, Italy, and Britain.  The aircraft will now feature Pratt & Whitney engines under a contract modification with a total value of $1.05 billion.  The agreement was initially supposed to finalize in May or June, however, negotiations were delayed after engine failures grounded the entire fleet.

Government Technology Solutions Update

The Department of Defense (“DoD”) now requires senior officials to review major acquisitions before programs move into the technology development phase.  This review, known as Milestone A, is part of the Better Buying Power 3.0 (“BBP”) initiative, which focuses on driving technical excellence into systems bought by the military.  The review will ensure well-defined user’s needs, thorough alternatives analysis, and significant program support.  This new step if the acquisitions process seeks to eliminate discrepancies between the original acquisition strategy and requests for proposals (“RFP”) that are issued.

The Army is seeking to modernize the Army Knowledge Online-Enterprise System (“AKO-ES”) through the use of a four-year indefinite delivery / indefinite quantity (“IDIQ”) contract.  A draft of the performance work statement (“PWS”) was issued on October 29th.  The contract will cover a broad range of technical support services to manage the system’s operations and maintenance, as well as the reuse and redesign of existing systems.  The Army will consider closing down applications, systems, and facilities in order to redevelop and repurpose existing systems.

Big Movers

Engility Holdings, Inc. (Up 19.6%) – Shares were up this week after the Company announced the close of its $1.1 billion acquisition of TASC, Inc.

Sturm, Ruger & Co. (Down 19.0%) – Shares were down this week after the Company reported a sharp drop in firearms sales with revenue decreasing to $98.3 million from $170.9 million one year ago.

Relevant Transactions

Delta Information Systems, Inc. acquired Ampex Data Systems Corporation, a developer and manufacturer of digital storage systems.  Terms of the deal were not disclosed.(1)

Outdoor Venture Corporation acquired Sotera Defense Solutions, Engineered Solutions Division, a provider of testing and engineering services to the aerospace and energy markets.  Terms of the deal were not disclosed.

Gen Cap America, Inc. acquired AeroSystems Engineering, a provider of testing and engineering services to the aerospace and energy markets.  Terms of the deal were not disclosed.

Acentia acquired Optimos, Inc., a provider of mission-centric information technology solutions to public sector customers.  Terms of the deal were not disclosed.

Booz Allen Hamilton acquired Epidemico, Inc., a provider of early insights, continuous monitoring, and consumer engagement for varied aspects of population health.  Terms of the deal were not disclosed.

Engility entered into a definitive agreement to acquire TASC, Inc., a provider of professional services to the national security and public safety markets.  The deal is an all-stock transaction valued at approximately $1.1 billion.

Lockheed Martin entered into a definitive agreement to acquire Systems Made Simple, Inc., a provider of health information technology solutions to the U.S. Federal Government.  Terms of the deal were not disclosed.

(1) KippsDeSanto & Co. acted as the exclusive financial advisor to Ampex Data Systems Corporation

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Industry Week in Review – October 24, 2014

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Aerospace & Defense Update

The National Business Aviation Association’s 2014 Business Aviation Convention & Exhibition (“NBAA 2014”) took place in Orlando earlier this week.   NBAA 2014 showcased approximately 1,100 exhibitors and attracted more than 26,000 business aviation professionals.  Gulfstream announced its new G500 and G600 business class jets in the week leading up to the show, which subsequently provided the company with a grand stage to flaunt the new aircrafts’ capabilities.  Other highlights of the convention include Bombardier introducing the mockup of its new Challenger 650 and Embraer obtaining the type certificate for its Legacy 500.  Next year’s convention is scheduled for November 17th – 19th, 2015 in Las Vegas, NV.

On Wednesday, Boeing announced third quarter earnings of $2.14 per share, up from $1.80 per share for the same period one year ago and beating analysts’ estimates of $1.97 per share.  The company’s revenue increased from $22.1 billion in 3Q13 to $23.8 billion for 3Q14, while its quarterly profit rose 18%, largely driven by rising commercial aircraft demand.  Highlights for the third quarter include growing backlog to a record $490 billion, adding 501 net new orders for commercial aircraft, launching the 737 MAX 200 model, securing a NASA Commercial Crew Transportation contract worth $4.2 billion, and returning $1.5 billion to shareholders through share repurchases and dividends.  Despite strong third quarter performance, Boeing’s shares slid 4.3% on Wednesday.

Government Technology Solutions Update

The Department of Justice (“DOJ”) has recently restructured its National Security Division (“NSD”) to shift its focus towards efforts on cybersecurity.  The department made new appointments to refocus on countering state-sponsored cyber terrorism and espionage.  Most new appointees have a background in cybersecurity litigation.  In addition to new appointments, the DOJ also created a new Deputy Assistant Attorney General role within the NSD which has been filled by Luke Dembosky.  The Deputy Assistant Attorney General will oversee the protection of national assets and critical infrastructure by leading a cybersecurity focused team of prosecutors spread across each district office of the National Security Cyber Specialists network.

The One Acquisition Solution for Integrated Services (“OASIS”) Small Business (“SB”) contract is open for business and off to a strong start.  Thus far, five Federal agencies have issued task orders worth up to $68 million under OASIS SB.  The largest task order, with a $57 million ceiling value, was awarded by the Security and Exchange Commission to Amyx Inc.  Task orders seek services such as acquisition and contract life cycle management support.  OASIS SB currently includes 123 companies, however, the GSA expects to use an on-ramp process to transition companies that have outgrown SB designation to the unrestricted portion of the contract after five years.

Big Movers

General Dynamics Corporation (Up 9.6%) – Shares were up this week after the Company reported third quarter profits of $696 million, compared to $651 million for the same period last year.  General Dynamics’ earnings per share increased from $1.84 to $2.06 and beat analysts’ estimates of $1.91.

FLIR Systems, Inc. (Up 10.3%) – Shares were up this week after the Company released its third quarter earnings report and noted a 5% increase in third quarter revenue to $375 million, as well as a backlog of $579 million, up 18% YTD.

Relevant Transactions

Selex ES acquired Tactical Technologies Inc., a provider of electronic warfare analysis software and services.  Terms of the deal were not disclosed.

BAE Systems entered into a definitive agreement to acquire Perimeter Internetworking Corp., doing business as SilverSky, a provider of cloud-based email and network managed security services.  The deal is worth an estimated $232.5 million.

StoneCalibre acquired NetPlus, a provider of Telecom Infrastructure Management software solutions for commercial and government entities.  Terms of the deal were not disclosed.

Booz Allen Hamilton acquired Genova Technologies’ healthcare unit, a provider of IT solutions and strategy for the Centers for Medicare & Medicaid Services.  Terms of the deal were not disclosed.

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Industry Week in Review – October 17, 2014

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Aerospace & Defense Update

General Dynamics’ subsidiary, Gulfstream Aerospace Corporation, announced two new Gulfstream business jets, the G500 and the G600 aircraft.  The updated aircraft are more efficient and can travel farther distances than their predecessors at faster speeds.  The list prices of the aircraft are $43.5 million and $54.5 million, respectively, and include state-of-the-art technology including the active control sidesticks and the next-generation enhanced vision system.  Both of these new aircraft feature wide cross-sectioned cabins and will have a capacity of 19, with multiple living spaces.  Some of the suppliers for the new aircraft include Pratt and Whitney Canada, for the PW800 series engine, Honeywell, for the avionics touchscreen display, and Esterline, for the overhead panel.  Deliveries for the G500 are expected to begin in 2018 with the G600 trailing by about 12 to 18 months, entering service in 2019.

This past week at the Association of the U.S. Army (“AUSA”) annual meeting, it became evident that Army leaders are optimistic about the future for acquisition reform.  The increased focus on competition and attention from Congress are both signs that reform will, in fact, begin to happen.  Technology, in particular, will be a major target for increased competition.  For example, the forecasted plan is to get a request for proposals on the street very quickly for manpack radios and then to run all qualified proposals through operational tests.  The goal is to drive competition with these updated processes in order to ultimately increase innovation in all that the Army does.  Furthermore, in order to identify programs that require update, the new Army Warfighter Assessments annual war game will test new technologies and concepts and promises to stimulate rapid change for years to come.  The next conference of the season will be the National Business Aviation Association (“NBAA”) Conference, held from October 21st to 23rd.

Government Technology Solutions Update

In an effort to implement the Government Accountability and Transparency Board’s recommendations, the Federal Acquisition Regulations (“FAR”) Council has set an October 1, 2017 deadline for Federal agencies to begin using the Procurement Instrument Identification (“PIID”) numbering system.  Use of PIID will be required for all contracting actions after the effective date and will be a unique government-wide identifier for a minimum of 20 years.  The 13 to 17 alpha and / or numeric sequence will convey the contracting office, the fiscal year of award or action, and the type of contract or vehicle.  This effort by the PAR Council is an attempt to achieve consistent and accurate procurement data across the Federal government.

The Council of Inspectors General (“IG”) analyzed a sample of 77 commercial cloud contracts across 19 civilian agencies worth approximately $1.6 billion and found that the majority failed to implement federal requirements and best practices.  All contracts did not follow specifications recommended in the federal cloud computing guidelines and best practices, while 59 of the 77 systems were not compliant with the Federal Risk Authorization and Management Program (“FedRAMP”).  As a result of these findings, the Council of IG recommended to the Office of Management and Budget that agencies create a plan to enforce FedRAMP compliance, use standardized contract clauses when adopting cloud computing technologies, establish process and reporting mechanisms, and conduct routine reviews of agencies.

Big Movers

Textron, Inc. (Up 10.4%) – Shares were up this week after the Company announced that it will open a larger service center at Paris-Le Bourget Airport in order to perform maintenance and modification work for Europe’s Beechcraft, Cessna, and Hawker aircraft owners.

Rolls Royce (Down 10.3%) – Shares were down this week after the Company warned that revenues may fall as trade sanctions against Russia take effect.

Relevant Transactions

Novaria Group acquired “substantially all” of the assets of Weatherford Aerospace, a provider of aircraft wing skins and unique services related to aerospace products.  Terms of the deal were not disclosed.

View Systems, Inc. to merge with Potomac River Group LLC, a provider of specialized technical support services to the U.S. Federal Government.  Terms of the deal were not disclosed.

G.E. Capital Aviation Services Limited to acquire Milestone Aviation Group Limited, a lessor of helicopters.  The deal is worth an estimated $1.78 billion.

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Industry Week in Review – October 10, 2014

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Aerospace & Defense Update

This past Tuesday, Boeing released its biennial World Air Cargo Forecast at the International Air Cargo Forum and Exhibition in Seoul, South Korea.  The forecast projects an annual growth rate of 4.7% over the next decade, with global airfreight traffic more than doubling by 2013.  According to Boeing, an improvement in global industrial production over the last 18 months, as well as anticipated long-term trade growth trends, are key drivers of the expected increase in global airfreight traffic.  Specifically, the Asia – North America and Europe – Asia markets are forecasted to lead air cargo traffic volume, while Asian markets are expected to demonstrate the highest growth rates over the next 20 years.  Deliveries of freighter aircraft are also expected to grow in response to the expected increase in air cargo.  In its forecast, Boeing projects deliveries of 840 new airplanes and 1,330 passenger-to-freighter conversions during the next decade.

Airbus Group is considering selling a 10 percent stake in Dassault Aviation as part of its plan to unwind its 46 percent holding in the company.  Additionally, Airbus would further reduce its ownership of Dassault through a shareholder buyback that was approved last month.  Ultimately if Airbus decides to pursue this route, the combined value of the deals could be worth close to $1.6 billion.

Government Technology Solutions Update

The Congressional Budget Office’s (“CBO”) latest estimates show that the Federal Government budget deficit has fallen to $486 billion, the lowest level in six years.  Boosted government revenues, as a result of the recovering economy, as well as the imposed cuts on Federal agency operating budgets have significantly improved the $1.4 trillion record deficit in 2009.  However, the CBO cautions that the deficit will balloon in future years as the Baby Boomer generation starts to claim Social Security and Medicare benefits if these programs are not changed.  In the next week, the Treasury Department and the White House Budget Office will issue an official report on the budget.  The findings are expected to mirror CBO’s estimates.

Deltek has released a report outlining the 20 largest contracts expected to be released in GFY2015.  The combined value of the listed vehicles is approximately $206 billion, up $45 million from GFY2014, with a mix of contracts split fairly evenly between defense and civilian agencies.  In past years, top contracts had largely been dominated by defense contracts; however, GFY2015 saw a shift towards IT procurement which represent 11 of the top 20 contracts.  The General Services Administration vehicle for IT services, Alliant II Unrestricted, holds the top spot on the list with an estimated ceiling value of $50 billion.

Big Movers

Oshkosh Corporation (Down 9.8%) – Shares were down this week after the Company announced plans to lay off more than 300 workers as a result of decreased military truck orders.

Relevant Transactions

Novetta Solutions, LLC acquired Digital Results Group, Inc, a leading provider of innovative web-enabled software and technology solutions that fuse, in real-time, sensor and intelligence data to support operations from the tactical edge to the global enterprise primarily for defense customers.  Terms of the deal were not disclosed.  KippsDeSanto & Co. served as financial advisor to Digital Results Group, Inc.

Channel Technologies Group, LLC acquired Materials Systems Inc., a manufacturer of piezoelectric ceramics, transducers, and complex sonar and navigation systems for defense and commercial customers. Terms of the deal were not disclosed.

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Industry Week in Review – October 3, 2014

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Aerospace & Defense Update

Bombardier Inc. announced a firm order for 40 of its new CSeries passenger jets.  The Ireland based company, Macquarie AirFinance Ltd., subsidiary of the Australian Company, Macquarie Group, Ltd., is the third lessor to order the 135-seat CS300 model and has options to purchase another 10 aircraft.  The purchase preceded a boost of Bombardier’s stock price by 4.3% to $3.28USD as Bombardier aims to challenge the narrowbody-jet duopoly of Boeing Co. and Airbus Group.

As fiscal 2014 winds down, the Department of Defense (“DoD”) and the armed forces have released a multitude of new contracts totaling $2.85 billion.  Of the 93 contracts released, some of the big winners included Lockheed Martin with a $246.6 million modification to the F-35 drag chute system and Atlanta’s Science Research Corp. with a $75.6 million contract for procurement of support services.  The majority of spending came from the Defense Logistics Agency with $800 million on an array of contracts.

Government Technology Solutions Update

On October 1st, NASA awarded 56 infinite delivery / infinite quantity (“IDIQ”) contracts under the Solutions for Enterprise-Wide Procurement Five (“SEWP V”) vehicle to 43 technology firms.  Combined, the awards totaled $20 billion over the contract’s five year base period – the total period of performance is ten years (five-year base plus one five-year option).  Agencies are expected to use this SEWP V for purchasing advanced IT and computer technologies, processing capabilities, and network equipment.  The current awardees are divided into two groups: “Group A,” which provides computer based systems, and “Group D,” which provides networking, security, video, and conferencing solutions.  Two additional groups, “Group B” and “Group C” are expected to be awarded in the next week to Service-Disabled Veteran-Owned small businesses and other small businesses respectively.

The Office of Management and Budget (“OMB”) has set standardized metrics for agencies to collect, measure, and track financial awards.  The publicized data will be used to increase transparency of agency awards in order to reduce administrative burden, waste, and fraud.  The OMB states that agencies may save up to $50 million per year by using these standardized metrics to reduce improper payments.

Big Movers

American Science and Engineering (Down 14.0%) – Shares were down this week after the Company reported earnings data that missed analysts’ expectations.  The company’s revenues decreased to $35.5 million from $43.1 million in the second quarter comparted to the first quarter of fiscal 2014.

Relevant Transactions

MacDonald, Dettwiler, and Associates Ltd. acquired Advanced Systems, a line of business from General Dynamics Advanced Information Systems, Inc., that has in-depth experience in development and application of radar and other information sensors for the U.S. Government.  Terms of the deal were not disclosed.

Air Industries Group acquired AMK Technical Services, a provider of welding and machining services for diversified aerospace and industrial customers.  The deal is worth an estimated $6.8 million.

Fastenal Company acquired certain assets from Av-Tech Industries, a wholesale distributor of aerospace fasteners, electronic components, and miscellaneous aircraft parts.  Terms of the deal were not disclosed.

Esterline Technologies Corporation acquired Barco N.V.’s Aerospace and Defense Display business, a manufacturer of harsh-environment displays and visualization systems.  The deal is worth an estimated $190 million.

Exelis, Inc. completed its spinoff of Vectrus, Inc.; the new company operates as a provider of infrastructure asset management, information technology, and network communication services, and logistics and supply chain management.  The market cap for the new company is ~$227 million.

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Industry Week in Review – September 26, 2014

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Aerospace & Defense Update

Boeing enhanced its footprint in Africa this week, as the company announced it received an Ethiopian Airlines order worth $2.1 billion.  The deal, which is for 20 737 Max 8 aircraft and includes an option to buy an additional 15 737 Max 8s, is the largest order the aircraft manufacturer has received from an African based airline to date.  The order comes in response to increased demand throughout Africa, as demonstrated by a 4.9% growth in the region’s passenger air traffic for July, according to the International Air Transport Association.  Currently, Ethiopian Airlines has 68 planes in operation, 16 of which are various Boeing 737 models.  The addition of 20 planes to Ethiopian Airlines’ fleet positions the company to capitalize on the growth trend in the African aviation industry and establish itself as a major player in the region.  Boeing’s ability to conduct deals with foreign customers is largely contingent on availability of funding provided through loans granted by the U.S. Export – Import Bank (“Ex – Im Bank”).  As such, Boeing’s business with foreign customers relies heavily on the continuation of the Ex – Im Bank’s charter, which is scheduled to expire at the end of the month.

Government Technology Solutions Update

The Department of Defense (“DoD”) is expected to release a memo in late October allowing military branches to directly procure cloud services.  The expected policies will require military branches to provide detailed business case analyses for cloud procurement decisions and to comply with acquisition requirements and cybersecurity mandates.  This initiative is a direct result of the rescindment of Defense Information Systems Agency’s (“DISA”) position as the Pentagon’s exclusive cloud broker.  Though DISA will no longer be the only procurer for cloud solutions, it will still be involved in securing the DoD’s IT systems.

Protests against the $7.2B Army Intelligence & Security Command’s (“INSCOM”) Global Intelligence Support Services (“GI”) indefinite delivery / indefinite quantity (“IDIQ”) have already started for both the small business and full and open categories.  Both a small business and a large business filed protests less than two weeks after the contract was announced – September 22nd and 19th respectively.  The Government Accountability Office’s decisions on these protests are due between December 29th and 31st.  The GI contract was awarded to 11 large businesses and ten small businesses to support intelligence and security operations, information operations, facilities mission support, and sustainment services.

Big Movers

Ducommun Incorporated (Up 5.1%) – Shares were up this week after the Company was awarded a contract with Boeing to produce ground and flight spoilers for the 737 Max.

AAR Corp. (Down 11.0%) – Shares were down this week after the company reported first quarter earnings and revenue that missed analysts’ expectations.  The company reduced its earnings estimate from $1.80 – $1.90 per share to $1.65 – $1.75 per share.

Relevant Transactions

AIM Aviation Ltd. acquired Altitude Aerospace Interiors Ltd., a provider of aerostructure components and custom cabin interiors.  Terms of the deal were not disclosed.

TriMas Corporation acquired Allfast Fastening Systems, Inc., a manufacturer of solid and blind rivets, blind bolts, and installation tooling for the aerospace industry.  The deal is worth an estimated $360 million.

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Industry Week in Review – September 19, 2014

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Aerospace & Defense Update

Airbus Group has announced that after a detailed and comprehensive portfolio assessment, it will divest some of its subsidiaries and business units within its defense and space division.  These divestitures will include Fairchild Controls, Rostock System-Technik, AvDef, ESG, and Atlas Elektronik.  The aerospace and defense conglomerate may also consider divesting its commercial and para-public communication business.  The move will further develop the defense and space division just a year after Airbus combined the two units.  Focus will shift to industrial alternatives as a means for the division’s security and defense electronics businesses and for future growth.

Timken Co. has also announced that it will restructure its aerospace business.  In efforts to improve performance, Timken will eliminate the management structure for that business and seek a buyer for its aerospace MRO parts business.  Specifically, Timken will close an engine repair and overhaul operation in Arizona and an aerospace bearing plant in England.  The company will continue to explore ways to streamline operations and generate growth.

Government Technology Solutions Update

This past week, both the House and the Senate passed a Continuing Resolution (“CR”) to keep the Federal Government open until December 11, 2014.  The bill includes an amendment to authorize the training and equipping of Syrian rebels to fight the Islamic State of Iraq and the Levant and has several provisions to address other current key issues; however, it does not address budget decisions for individual government agencies.  Additionally, the bill does not block the one percent pay raise for government workers in 2015.

A recent report released by Deltek has found that Federal agencies are increasingly relying on indefinite delivery / indefinite quantity (“IDIQ”) contracts to accomplish their technology and policy goals.  The Federal Information Technology Task Order Vehicle Trends report found that 50% of IT dollars from 2010-2013 were spent via IDIQ task orders.  For government contractors, IDIQs can often provide longer-term revenue streams and more predictable scopes of work.  However, the increased use of task order contracts has also lengthened pre-request for proposal and post-award timelines, as a result of agencies honing in on required capabilities and award protests.

Big Movers

API Technologies Corporation (Up 8.8%) – Shares were up this week after the Company announced that it has been awarded a new patent for antenna technology for GPS and asset tracking applications.

TASER International, Inc. (Down 12.5%) – Shares were down this week following an insider trading allegation.

Relevant Transactions

Valence Surface Technologies, portfolio company of Thrive Capital, acquired Blue Streak Finishers, a provider of processing and related services for large complex aerostructures.  Terms of the deal were not disclosed.

Charlesbank Capital Partners acquired HDT Global, a provider of solutions for government, military, commercial, and industrial customers, from Metalmark Capital.  Terms of the deal were not disclosed.

Cobham plc completed its acquisition of Aeroflex Corporation, the transaction, previously announced on May 20th, has now successfully closed.  The deal is worth an estimated $1.46 billion.

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Industry Week in Review – September 12, 2014

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Aerospace & Defense Update

Earlier this week, Ryanair entered into an agreement with Boeing to purchase as many as 200 jets from the company’s 737 Max family.  The Irish-based discount carrier announced an order for 100 of the Max 200 models, with an option to acquire up to 100 more.  At list prices, the deal for the initial 100 aircraft is worth approximately $11 billion.  Deliveries of the Max 200, which promises an 18% gain in fuel savings over other narrow-body models, are scheduled to start in 2019 and run until 2023.  Features of the aircraft include upgraded engines and 197 seats, compared to 189 on the 737-800 model.  The capacity to carry additional passengers is projected to add roughly $1 million a year in revenue for each jet.  The Ryanair order, which comes on top of a contract for 180 737-800s, further supports the airline’s goal to double in size over the next 10 years.

Bombardier finally resumed test flights of its CSeries Jet after one of the aircraft’s Pratt & Whitney engines failed back in May.  Since the failure, Pratt & Whitney has made a number of modifications to the geared turbofan engine’s oil lubrication system, which was determined to be the root cause of the failure.  Keeping the jet airborne and conducting additional test flights is critical to the company’s ability to meet its target for a CSeries debut in the second half of 2015.  Project development costs for the aircraft are now roughly $4.4 billion, nearly $1 billion more than originally expected.

Government Technology Solutions Update

On September 9th, House Appropriations Chairman, Hal Rogers, introduced what he referred to as a “clean” short-term Continuing Resolution (“CR”) to prevent a government shutdown at the end of the Government Fiscal Year on September 30th.  The House Committee on Rules is currently reviewing the introduced legislation, which would continue agency, programs, and services funding at 2014 levels, an annual cap rate of $1.0 trillion, until December 11, 2014.  The bill also includes several provisions to prevent detrimental changes to government programs, such as an extension for expiring Department of Defense activities; however, all such extensions are funded within the annual cap of $1.0 trillion.  In his introductory statement, Rogers stated the bill is free of “controversial riders” and does not seek to change existing federal policies.  Additionally, he emphasized this bill is a temporary measure that “does not reflect the changing needs of the nation or new budget priorities” and urged the Senate leadership to push completion of the GFY2015 Appropriations legislation.

Big Movers

Leidos Holdings, Inc. (Down 7.6%) – Shares were down this week after the Company reported a 10% year over year decline in revenue compared to the second quarter of last year.

Alliant Techsystems Inc. (Up 6.2%) – Shares were up this week as investors anticipate greater procurement of weapons systems in response to rising geopolitical tension in the Middle East.

Relevant Transactions

The CapStreet Group, LLC acquired Red Aviation LLC, a provider of maintenance and repair services, as well as aftermarket sales, for business jet parts and engines.  Terms of the deal were not disclosed.

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