Industry Week in Review – January 4, 2018
KKR & Co. will invest $1 billion in a joint venture with Altavair L.P. to create a leased commercial aircraft portfolio. A significant number of seats on the Senate Armed Services Committee are expected to turnover, including those of Lindsey Graham and Ted Cruz. Government automation efforts will ramp up in 2019, increasing efficiency and offering reskilling opportunities.
Aerospace & Defense Update
Global investment firm, KKR & Co. announced this week that it plans to invest $1 billion in a joint venture with Altavair L.P. to create a leased commercial aircraft portfolio. Managed by several aircraft-finance professionals, Altavair is a leading investment firm specializing in aviation finance with a focus on acquiring, leasing, re-purposing, and selling commercial jet aircrafts and engines. With this investment, KKR will take a 50% stake in the aircraft financier. KKR currently has over 60 single-aisle planes in its portfolio and will soon have access to the 200 aircrafts Altavair has under management, allowing the partnership to grab significant market share in the competitive aircraft leasing space.
The Senate Armed Services Committee is about to undergo a significant change as eight seats on the military panel, nearly one-third of the committee membership, could turnover before its next meeting. Hawkish senators Lindsey Graham and Ted Cruz are among the five Republicans scheduled to leave the committee. Moderate committee turnover is usually expected every two years as elections alter the congressional landscape; however, eight new committee members is an unusual level of change. This new group is entering the committee at a critical juncture considering the substantial amount of uncertainty surrounding a divided Congress, the U.S.’s position in the Middle East, and the 2019 defense budget. The committee will add five new Republican and three new Democrat members.
Government Technology Solutions
Amid ongoing automation efforts by the government, federal agencies believe that new technologies like artificial intelligence (“AI”) and machine learning (“ML”) may reduce the federal employee base as technology and potentially government contractors replace certain federal responsibilities. To hopefully offset this likelihood, agencies intend to shift to increase training for existing employees around these emerging technologies. The Director of Strategic Technology Management at the Department of Homeland Security (“DHS”), Bill Pratt, claims that agencies are understaffed and technologically behind; therefore, agencies should be eager to automate their systems rather than worried that doing so will replace jobs. The administration has continued to encourage agencies to adopt automation as a means to draw employees away from repetitive, labor-intensive tasks and towards more high-value work. Robotic process automation (“RPA”), for example, is already being used at the General Services Administration (“GSA”) and the Department of Health and Human Services (“HHS”) and is expected to expand to other agencies in the near future. As automation becomes a greater emphasis in 2019, integrating automation into federal agencies will increase efficiency in the government and hopefully offer existing personnel opportunities to adopt new skills and technology.
Bombardier (Up 12.2%) – Share prices were up this week after Airbus announced it will build additional Bombardier developed aircrafts on the U.S. Gulf Coast.
Perspecta Inc. (Up 11.1%) – Share prices were up this week as the outlook for government IT in 2019 continues to look strong.
Cloudera, Inc. has completed an all-stock merger with Hortonworks, Inc., a provider of enterprise-grade, global data management platforms, services and solutions that deliver actionable intelligence. Cloudera, Inc. is a developer of machine learning and analytics, optimized for the cloud. Terms of the transaction were not disclosed.
Cubic Corporation has acquired GRIDSMART Technologies, a provider of camera sensors for intersections and says it has counted and classified over 43B vehicles through 54M hours of real-world video processing in 7,000 intersections across 1,200 cities. The deal is worth an estimated $87.0M.
Vector Capital Corp. has entered into an agreement to acquire Aspect Software, Inc., a developer of interaction management, workforce optimization and self-service solutions. The deal is worth an estimated $100.0M.