Industry Week in Review –April 13, 2018

Aerospace & Defense Update

A report released earlier this week by Space Angels, a fund that invests in early-stage space companies, found that space ventures have raised close to $1 billion from non-government equity investors during the first quarter of 2018.  Approximately $500 million of this funding came from Fidelity’s investment in SpaceX, which is intended to drive the development of Starlink, SpaceX’s satellite communications network.  Other notable investments include Searchlight Capital’s $150 million investment in Global Eagle, a provider of satellite connectivity, and Spaceflight’s announcement of a $150 million Series C funding round.  Space Angels noted that 2018 is expected to be a strong year for the space sector, citing the emergence of small launch vehicles, in conjunction with the growth of small satellite systems, as key growth areas.

At the Navy League’s Sea-Air-Space conference, several companies pitched possible initial-entry, rotary-wing training helicopters to serve as replacements to the aging TH-57 Sea Ranger fleet.  The TH-57 has been in active service since the 1970s, and the Navy has recently been putting out requests for information for potential replacement options.  Airbus, Bell, and Leonardo each brought an example of a training helicopter to the Navy trade show.  The Navy has announced that it plans to purchase a new training helicopter by GFY2020.

Government Technology Solutions

In his testimony before the Senate Judiciary and Commerce committees on Tuesday, Mark Zuckerberg revealed more details regarding Facebook’s response to the Russian tampering in the 2016 presidential elections.  Zuckerberg stated that Facebook notified the DNC and RNC, telling the parties that the two presidential campaigns were targets of Russian hackers.  Previously, it was reported that Facebook had only notified the FBI of Russia’s tampering in the elections.  Zuckerberg stated that APT28, or Fancy Bear, a hacking group linked to Russia’s Main Intelligence Directorate, had previously attempted to hack Facebook in the past, but Facebook’s security team saw unusual activity in months leading up to the election and notified the DNC and RNC.  In the summer before the election, Facebook’s security team noticed increased activity from Russian hackers when APT28-related accounts created fake personas to funnel stolen information to journalists.  Even though Facebook eventually notified the DNC and RNC, Zuckerberg claimed responsibility and stated that Facebook was too slow in identifying the Russian cyber-attacks.

According to a new Deltek analysis, the federal health IT budget is expected to grow to $8.5 billion in 2022 from $6.1 billion in 2018, driven heavily by the spending at the Department of Veterans Affairs (“VA”) and Department of Defense (“DoD”).  Deltek divides the health IT budget into agencies who protect people from health risks, provide health care services, and pay for health care services.  Agencies that provide health care services, such as the VA and several DOD organizations, will receive the biggest spend, with Deltek estimating it to grow from $3.3 billion in 2018 and $5.4 billion in 2023.  The $2.1 billion in growth is expected to be solely allocated to the VA, as the agency is the biggest prover of health care services and is also performing its own electronic health record (“EHR”) implementation.  Major health IT contracts such as CIOSP3, T4NG, and SEWP V expect to receive a large portion of this increase in funding.

Big Movers

 Elbit Systems (up 4.8%) – Share prices were up this week after the company completed the acquisition of the assets and operations of Universal Avionics Systems for a purchase price of approximately $120 million.

 Analogic (down 12.4%) – Share prices were down this week after the law office of Brodsky & Smith announced it is investigating potential claims against Analogic’s Board of Directors for possible breaches of fiduciary duty in connection with the sale of the company to Altaris Capital Partners.


 General Dynamics’ subsidiary Jet Aviation has agreed to acquire Hawker Pacific Pty. Ltd., a provider of a wide range of aviation services, including civil MRO services, government fleet management, FBO services, aircraft sales and parts sales.  The deal is worth an estimated $250 million.

 Luminar Technologies, Inc. has acquired Black Forest Engineering, LLC, a provider of high-performance receivers used in LiDAR systems.  Terms of the deal were not disclosed.

 SOS International has acquired STG Group Holdings, Inc., a provider of mission-critical technology, cyber, and data solutions.  The deal is worth an estimated $83 million.

 UmbraGroup S.p.A. has acquired Meggitt plc’s subsidiary Thomson Aerospace & Defense, a provider of highly engineered ball screws and electromechanical systems to defense and commercial clients.  Terms of the deal were not disclosed.

Woodward, Inc. has acquired Rolls Royce plc’s subsidiary L-Orange GmbH, a provider of fuel injection systems for industrial diesel, heavy fuel oil and dual-fuel engines.  The deal is worth an estimated $859 million.

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