Aerospace & Defense Update
This past week, Defense Secretary James Mattis officially introduced his plan for rebuilding the U.S. Armed Forces to address President Trump’s national defense strategy. Mattis issued a memo to Pentagon budget planners announcing his desire to “build a larger, more capable, and more lethal joint force” and provided guidance for the FY2017 budget amendment, the FY2018 President’s Budget request, and the FY2019 – FY2023 Defense Program. Mattis plans to increase immediate readiness by focusing on defense programs that are behind schedule and upgrading important military facilities. He is also advocating for increased defense funding so the U.S. can strategically increase its presence around the world.
After the Raytheon / Leonardo-Finmeccanica team publicly withdrew from the competition last week, Northrop Grumman has officially become the second company that has declined to submit a bid for the U.S. Air Force’s T-X advanced pilot training program. This news comes after Northrop’s earnings call last week, during which the Company’s CEO implied that Northrop was considering withdrawing from the competition. This ~$16.0 billion T-X jet trainer program will require the production of 350 aircraft by the end of 2024. Presently, Boeing, Lockheed Martin-Korean Aerospace Industries, and Sierra Nevada & Turkish Aerospace Industries are still in the competition.
Government Technology Solutions Update
On Wednesday, it was announced that cloud.gov, the Platform as a Service (“PaaS”) developed by the General Services Administration’s 18F agency, has been granted provisional authority to operate (“P-ATO”) by the Federal Risk and Authorization Management Program (“FedRAMP”). This makes cloud.gov the first fully-open source solution to be authorized by FedRAMP. Cloud.gov is a PaaS which allows Federal agencies to host their websites and applications online. The open-source nature of the site allows these agencies to more easily and efficiently connect with both employees and contractors to maintain and develop online solutions. With the P-ATO from FedRAMP, agencies will have a much more streamlined process in building or updating their own solutions, since the FedRAMP’s Joint Authorization Board (“JAB”) has already vetted cloud.gov’s security and compliance standards. This means that agencies who host and build solutions on cloud.gov do not have to go through the compliance process themselves. Cloud.gov went through the FedRAMP Accelerated, becoming just the second cloud provider to do so after Microsoft did so back in September of 2016.
On Tuesday, a draft of President Donald Trump’s planned executive order on cybersecurity was leaked, giving some insight into how his administration might approach the issue. In the draft, the Department of Defense (“DoD”) would be given an equal role to the Department of Homeland Security (“DoD”) in carrying out cybersecurity policies. When President Trump originally promoted this order, he noted that he would hold agency heads responsible for developing and maintaining a sound and secure cyber infrastructure within their own departments. The executive order would have also called for, and promoted, modernization initiatives aimed at creating and maintaining secure IT infrastructure within the Federal government. While not specifically outlined in any of the versions of the draft of Trump’s cybersecurity order, the President has maintained that the Federal government needs to continue to work with the private sector in developing these solutions. Mr. Trump was expected to sign this order into action on Tuesday evening, but as of right now, the order has been put on hold for the time being.
CACI (up 6.3%) – Share prices were up this week after the Company raised its top and bottom line guidance for FY2017.
Spirit AeroSystems (down 5.7%) – Share prices were down this week after the Company reported a 21.8% decrease in profit during 4Q16.
Acuity Technologies Holding Company, a portfolio company of DC Capital Partners, has agreed to acquire Owl Computing Technologies, a designer, developer, and manufacturer of advanced network security products and cyber defense solutions. Terms of the deal were not disclosed.
Altuiiq, LLC has acquired Alcyon, Inc., a provider of systems engineering, laboratory, and IT services to various Federal agencies and aerospace companies. Terms of the deal were not disclosed.
Analytic Services, Inc. (“ANSER”) has acquired Advanced Technology International, an organizer and manager of research and development consortia for the Federal government. The deal is worth an estimated $25.0 million.
Concept Plus, LLC has acquired Thao, Inc., a provider of Federal-specific expertise in electronic health record (“EHR”) interoperability, identity management, and care delivery. Terms of the deal were not disclosed.
Dos Rios Partners has acquired Pathfinder Aviation, Inc., a provider of helicopter services and logistical support, specializing in remote operations and extreme climates. Terms of the deal were not disclosed.
Liberty Hall Capital Partners, L.P. has acquired Quatro Composites, LLC, a provider of highly engineered advanced composite structures, components, and assemblies for the aerospace industry and medical and industrial markets. Terms of the deal were not disclosed.