KippsDeSanto & Co. Industry Week in Review – September 13, 2019

Transactions

Anduril Industries, Inc., a provider of border control technology including drones and towers which track movement using artificial intelligence, has secured a funding round that values the company at more than $1 billion and includes participation from Andreesen Horowitz.

BAE Systems plc has acquired Prismatic Ltd., a provider and developer of new and improved UAV systems and services. Terms of the transaction were not disclosed

dB Control, a subsidiary of HEICO Corporation, has acquired TTT-Cubed, Inc., a provider of cutting-edge RF Sources, Detectors, and Controllers for a certain wide range of aerospace and defense applications. Terms of the transaction were not disclosed.

Dinocrates Group has acquired Global Management Systems, Inc., a provider of local area network (LAN), operational support, configuration management, telephone data management, and voice over IP (VOIP) services to defense and civilian agencies, as well as commercial customers. Terms of the transaction were not disclosed.

Precision Aviation Group, Inc., a portfolio company of GenNx360 Capital Partners, has acquired Momentum Services Corporation, a provider of global service solutions for commercial and military aviation displays of all sizes with significant cost savings, high-yield, and minimum turn time. Terms of the transaction were not disclosed.

Raptor Scientific, LLC, a portfolio company of L Squared Capital Partners, LLC, has acquired Space Electronics, LLC, a provider of electronic circuit testers that are used by aerospace and defense OEMs. Terms of the transaction were not disclosed.

Red River Technology, LLC, Inc. has acquired CWPS, Inc., a provider of managed information technology (IT) and IT support services to commercial enterprises and government sectors. Terms of the transaction were not disclosed. KippsDeSanto & Co. served as the financial advisor to CWPS, Inc.

Saturn Satellite Networks, Inc., a subsidiary of Airspace Internet Exchange, has acquired NovaWurks, Inc., a provider and developer of modular satellites. Terms of the transaction were not disclosed.

Susquehanna Private Capital, LLC has acquired McNally Industries, LLC, a provider of precision systems for the defense and industrial markets primarily supporting new and legacy platforms. Terms of the transaction were not disclosed. KippsDeSanto & Co. served as the financial advisor to McNally Industries, LLC.

Tenex Capital Management, L.P. has agreed to acquire Allied Wire & Cable, Inc., a provider of specialty manufacturing and value-added distribution of wire and cable products for aerospace, government, military, and telecommunications markets among others. Terms of the transaction were not disclosed.

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KippsDeSanto & Co. Industry Week in Review – July 26, 2019

Industry Week in Review – July 26, 2019

Aerospace & Defense Update

Congressional leaders have agreed to a two-year debt and budget deal, ensuring spending stability and avoiding a potential partial government shutdown.  The deal includes $1.37 trillion in agency spending for GFY2020, with a slight increase for GFY2021.  Defense spending is expected to increase to $738 billion next year, and the deal includes flexibility in transferring money between accounts.  The amount represents a compromise between congressional Republicans and Democrats while ensuring the federal government will avoid its first-ever default on U.S. payments.  The deal was chiefly negotiated by the Speaker of the House, Nancy Pelosi, and the Treasury Secretary, Steven Mnuchin.  In addition to avoiding a federal default, the agreement will help prevent automatic spending cuts from hitting the Pentagon.

The Senate voted 90-8 to confirm Mark Esper as Secretary of Defense, completing a lengthy process to fill the top position in the Pentagon.  The office has been filled on an interim basis since former chief, Jim Mattis, resigned in December, and Esper’s confirmation ends the longest period in Pentagon history that there has not been a congressionally approved leader.  Esper takes charge at a time of heightened tensions with Iran, while many top civilian posts still remain vacant.  The position of Secretary of Defense had been filled by three acting secretaries since Mattis’ resignation, including Esper.  Esper is a military veteran and a graduate of West Point, and has made his career as a lobbyist for defense company Raytheon as well has holding various policy advisor roles on Capitol Hill.

Big Mover(s)

The Boeing Company (Down 8.6%)– Share prices fell as Boeing reported its worst ever quarterly loss in the wake of their announced $4.9 billion charge related to the 737 MAX groundings. Additionally, the Company announced they would not submit a bid on the upcoming Ground-Based Strategic Deterrent missile program from the Pentagon.

Northrop Grumman Corporation (Up 9.4%) – Share prices increased as quarterly earnings beat expectations by 9%. The Company is also expected to win the Ground-Based Strategic Deterrent contract to replace the Minuteman 3 intercontinental ballistic missile after Boeing announced they would not submit a bid.

Transactions

Advent International has agreed to acquire Cobham plc, a provider of radar and other electronic products for the defense and aviation industries. The deal is valued at an estimated $5.4 billion.

ClearSky has acquired Altamira Technologies Corporation, a provider of engineering and analytic services to the U.S. federal defense, intelligence, and homeland security communities.  KippsDeSanto & Co. served as the exclusive financial advisor to Altamira.  Terms of the transaction were not disclosed. 

Eaton Corporation plc has agreed to acquire Souriau-Sunbank Connection Technologies, a provider of highly-engineered solutions for harsh environments serving customers primarily in aerospace, defense, and space end markets. The deal is valued at an estimated $920 million.

Honeywell International, Inc. has acquired TruTrak Flight Systems, Inc., a provider of autopilots for experimental, light-sport and certified aircraft. Terms of the transaction were not disclosed.

 Octo Consulting Group, Inc., a portfolio company of Arlington Capital Partners, has acquired Connexta, LLC, a provider of Open Source Software (“OSS”) solutions for global Intelligence, Surveillance, and Reconnaissance (“ISR”) data interoperability needs across the U.S. federal defense and intelligence communities.  KippsDeSanto & Co. served as the exclusive financial advisor to Connexta.  Terms of the transaction were not disclosed.

Parsons Corporation has acquired QRC, LLC, a portfolio company of DC Capital Partners and a provider of survey tools for cellular communication systems, phone based measurement systems, stimulation tools, forensic tools, and integrated RF recording and playback equipment.  The deal is worth an estimated $215 million, including a $30 million transaction-related tax benefit.

PPG Industries, Inc. has agreed to acquire Dexmet Corp., a portfolio company of Sverica Capital Management. Dexmet is a provider of specialty materials for surfaces in aerospace, automotive, and industrial applications. Terms of the transaction were not disclosed.

Systems Planning and Analysis, Inc., a portfolio company of CM Equity, has acquired Veracity Forecasting and Analysis, Inc., a provider of decision support services to the government and defense sector. Terms of the transaction were not disclosed.

Vigor Industrial LLC, a portfolio company of The Carlyle Group, has agreed to acquire and merge with MHI Holdings, LLC, a portfolio company of Stellex Capital Management. MHI Holdings is a provider of ship repair of maintenance services. Terms of the transaction were not disclosed.

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KippsDeSanto & Co. Industry Week in Review – June 28, 2019

Industry Week in Review – June 28, 2019

Aerospace & Defense Update

In a lopsided 86 – 8 vote, the Senate passed a $750 billion defense authorization bill.  The $750 billion figure is approximately $17 billion larger than the $733 billion figure the House of Representative has targeted for FY2020.  The Senate’s bill includes a 3.1% pay raise for troops, an additional 6,200 service members, an allocation of $300 million in funding for military housing, and full funding of Pentagon nuclear modernization programs.  The bill passed with ease despite concerns regarding U.S.’ nuclear capabilities and the overall size of the budget.  Proponents tout the bill as continuing efforts to expand and modernize the military to counter growing geopolitical threats.  The House of Representatives plan to vote on its version of the bill next month and inter-chamber negotiations are expected to follow thereafter.

Due to the unearthing of additional software problems in Boeing’s 737 MAX airplane, the Company anticipates the aircraft’s grounding to extend through September.  This delay further disrupts flight schedules for many airlines, as it was previously expected the aircraft would be cleared for service by the end of August.  Airlines including Southwest, American, and United have removed the MAX from their schedules through September and have not committed to a timeline beyond that.  Boeing’s shares closed down 3% in the wake of the news.  The FAA has insisted that there is no specific timeline on returning the MAX to service, and that clearance will not be granted until their all maintenance checks and safety concerns have been fully investigated and resolved.

Big Mover(s)

Raytheon Co. (Down 5.1%) – Shares prices were down this week due to criticism from United Technologies Corp. (“UTC”) shareholders over the rationale behind the merger of UTC and Raytheon.

Triumph Group (Up 21.4%) – Share prices were up this week in response to Triumph’s announcement that it will begin supporting Mitsubishi’s SpaceJet M100 program.

Transactions

Accenture plc (NYSE:ACN) has agreed to acquire BCT Solutions, a technology consultancy that specializes in Command and Control, Cybersecurity, Cyber Defense services and expertise, supporting the delivery of Defense, National Security, and Public Safety mission-support capabilities. Terms of the transaction were not disclosed.

AerSale, Inc. has acquired Qwest Air Parts, Inc., a provider of aircraft dismantlement and the refurbishment and resale of used serviceable materials. Terms of the transaction were not disclosed.

Bromford Industries Limited, a portfolio company of Liberty Hall Capital Partners, acquired Accrofab Limited, a provider of complex fabricated and machined engine bracketry for the global aerospace industry. Terms of the transaction were not disclosed.

METIS Solutions, LLC, a portfolio company of Blue Delta Capital Partners, has acquired Pluribus International Corp., a provider of counterintelligence, critical infrastructure protection, all-source analysis, and other mission-focused support services to the IC, Department of Defense, and other national security clients.  Terms of the transaction were not disclosed.

Mitsubishi Heavy Industries Ltd. has agreed to acquire the CRJ regional jetliner program of Bombardier, Inc., which provides maintenance, support, refurbishment, marketing, and sales activities for the CRJ Series aircraft. The deal is worth an estimated $570 million.

Novaria Group, a portfolio company of Rosewood Private Investments and Tailwind Advisors, has acquired Acra Aerospace, LLC, a provider of the design, development, and manufacture of complex engine components. Terms of the transaction were not disclosed.

Saudi Arabian Military Industries, a subsidiary of the Saudi Arabian sovereign wealth fund, has agreed to acquire Advanced Electronic Company, a provider of the design, development, manufacture, maintenance, and repair of several advanced industry and military electronic systems, devices, and equipment. Terms of the transaction were not disclosed.  

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KippsDeSanto & Co. Industry Week in Review – June 07, 2019

Industry Week in Review – June 7, 2019

Aerospace & Defense Update

This week, Amazon Web Services (“AWS”) announced its first two ground-based stations were operational. These stations, which will be used by both commercial and government customers, provide next-generation communication capabilities that will enable satellite operators to access data in near-real time.  These stations are equipped with enhanced data processing capabilities, encrypted communications for sensitive data, and the ability to access satellites worldwide.  These features enable operators to control a given satellite through the ground station, load data from the satellite into the station, and process that data through a cloud computing and storage interface. The stations, which were designed with government users in mind, have built in protections for sensitive data. These protections will allow government agencies to transmit encrypted data through the network and into the AWS Ground Station terminals. Amazon expects these systems to be vital in disaster relief scenarios, where up-to-date images and information are essential to providing immediate and efficient aid.  Over the next six months, Amazon anticipates launching ten more operational stations.

The grounding of more than 370 Boeing 737 MAX aircraft has significantly increased demand for aircraft rental services.  Full-service aircraft rental providers such as EuroAtlantic Airways and Avion Express have witnessed increased activity as airlines attempt to patch their disrupted flight schedules caused by the 737 Max’s suspension.  These companies, which provide all essential components of flying a plane including pilot, staff, fuel, and insurance coverage, generally charge by the hour, with the cost of a single-aisle plane ranging up to several thousand dollars per hour.  However, since the 737 Max’s grounding, monthly lease rates have increased more than 30% for short-term narrow-body aircraft rentals.  Despite Boeing’s announcement that the Company has fixed the flight-control system ostensibly responsible for the two 737 MAX fetal crashes, the Federal Aviation Administration and international regulating authorities have yet to signal when they will clear the 737 MAX for flight.

Big Mover(s)

General Dynamics Corporation (Up 8.2%) – Share prices increased as it was announced that General Dynamic’s business unit, Land Systems, secured a $25.6 million contract to produce the MK 46 MOD 2 Gun Weapon System (“GWS”) for Littoral Combat Ship (“LCS”) and Landing Platform Dock (“LPD”). This comes after General Dynamic’s shares were down 10% in May.

SAIC (Up 12.1%) – Share prices rose as SAIC announced revenues increased 37% 1Q19, fueled through several notable contract awards such as the $292M follow-on Safety and Mission Assurance Engineering Contract with NASA and a $535M contract to provide information technology support for the Defense Threat Reduction Agency (“DTRA”).

Transactions

Wynnchurch Capital, Ltd. has agreed to acquire two Industrial Forging Business Units from Allegheny Technologies, Inc., a provider of carbon steel forged products used in aerospace and industrial end-markets.  The deal is worth an estimated $37.0 million.

BAE Systems, Inc. acquired Riptide Autonomous Solutions, LLC, a provider of innovative, affordable unmanned underwater vehicle (“UUV”) technology and solutions.  Terms of the transaction were not disclosed.

 Consolidated Precision Products Corp. has agreed to acquire the Cast Products business of Allegheny Technologies, Inc., a provider of titanium investment castings that are primarily used by aerospace & defense OEMs in the production of commercial jet airframes and engines.  Terms of the transaction were not disclosed.

Angeles Equity Partners, LLC acquired APCT, Inc. a provider of reliable, quick-turn printed circuit board (“PCB”) prototypes with global production management capabilities.  Terms of the transaction were not disclosed.

Patria Oyj acquired Belgium Engine Center SPRL, a provider of military jet engine maintenance, repair, and overhaul mainly servicing the Pratt & Whitney F100 engine which powers F-15 and F-16 aircraft. Terms of the transaction were not disclosed.

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KippsDeSanto & Co. Industry Week in Review – May 24, 2019

Industry Week in Review – May 24, 2019

Aerospace & Defense Update

This week, President Trump announced his intention to nominate Barbara Barrett to be the next Secretary of the Air Force.  In 2003, she was nominated for this same position, but withdrew her name before the confirmation process.  She was later nominated and confirmed as the U.S. Ambassador to Finland.  In addition to her experience as President George W. Bush’s Ambassador, Barrett brings a blend of both public and private sector experience to the position.  Previously, she served as the chairwoman of The Aerospace Corporation, a federally funded nonprofit corporation that provides technical guidance and advice on a wide array of military, civil, and commercial space missions.  President Trump believes that Barrett’s leaderships qualities, relevant experiences, and vast industry knowledge make her an ideal candidate to lead the Air Force and maintain U.S. air and space dominance.

An independent report released from the Congressional Budget Office (“CBO”) estimated President Trump’s proposed Space Force could cost as much as $4.7 billion in initial costs to launch the program.  This estimate is more than double the Trump administration’s previous estimate of $2 billion to establish the Space Force over the next five years.  The primary assumption driving this disparity is the Trump administration’s optimism around the Space Force’s ability to leverage existing Air Force infrastructure to remain efficient and suppress costs.  However, the CBO questions the viability of this strategy.  The Trump administration’s GFY2020 budget requests included $72 million to begin launching the Space Force.

Government Technology Solutions

This past week, the North American division of Serco Group plc, Serco, Inc., announced its intentions to acquire the Naval Systems Business Unit (“NSBU”) of Alion Science and Technology Corp. (“Alion”), including its Canadian business and several related contract operations, for $225 million.  Alion’s NSBU provides systems engineering for the Navy and will allow Serco, a U.K. based company, to secure a larger foothold in the growing U.S. defense market and hedge against potential headwinds from BREXIT and Teresa May’s impending June 7^th resignation. Additionally, this divestiture allows Alion to continue to shape its offerings more towards electronic warfare and intelligence, surveillance, and reconnaissance (“ISR”).  Serco, Inc.’s announcement represents its 2^nd U.S.-based transaction since buying SI International, Inc. in 2008, as it purchased BTP Systems, LLC in 2017.  Having completed two acquisitions over the past two years, Serco, Inc. is demonstrating its desire to use M&A as a tool to add scale and expand offerings while taking advantage of favorable budgetary conditions in the U.S.

Big Mover(s)

Babcock International (Down 11.3%) – Share prices were down this week amid a slowdown in government orders ahead of Brexit and two of its largest contracts coming to an end.

Transactions

Park-Ohio Holdings Corporation has agreed to acquire Erie Press Systems, a provider of forging presses, hydraulic and mechanical presses, and metal stretch-forming and carbon extrusion machines for aerospace and defense markets.  Terms of the transaction were not disclosed.

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