Post on 12-Jul-2020
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Aerospace, Defense and Government Services
Quarterly Industry Update
First Quarter 2013
1
First Quarter 2013
% Change
4 Weeks Q1 2013 52 Weeks
Defense Prime Index 7.0% 3.3% 6.7%
Government Services Index 6.9% 15.6% 15.6%
Defense Systems Index 1.5% 6.0% 5.3%
Middle Market D&G Services Index 11.8% 14.0% 15.5%
Large Cap Aerospace Index 5.8% 11.9% 13.4%
Mid Cap Aerospace Index 7.4% 13.0% 5.4%
Small Cap Aerospace Index 2.8% 9.3% 4.8%
S&P 500 3.4% 10.0% 11.4%
Notable Quarterly M&A Activity Capital Markets
ManTech acquired Alta Systems (1/9/13)
Triumph Group acquired Goodrich Pump & Engine
Control Systems from United Technologies (3/18/13)
DC Capital Partners acquired CompSec (1/29/13)
Teledyne acquired Reson A/S (3/1/13)
Arlington Capital Partners acquired MB Aerospace
Holdings (3/18/13)
Ericson Air-Crane plans to acquire Evergreen
Helicopters (3/19/13)
Industry News Quarterly Summary
On March 1, President Obama issued an order putting sequestration into effect. Shortly after, the House and Senate agreed to a
continuing resolution (CR) to fund federal agencies through September 30, 2013, maintaining the cuts from sequestration but avoiding
a government shutdown. The CR extends the federal civilian workers’ pay freeze for a third consecutive year and specifies funding
for several key agencies’ respective appropriations bills. Congress now turns its focus to the FY 2014 budget.
President Barack Obama signed an executive order, titled Improving Critical Infrastructure Cybersecurity, aiming to strengthen the
nation's critical infrastructure through cross-sector information-sharing.
Secretary of Defense Chuck Hagel announced plans to bolster US missile defenses in response to "irresponsible and reckless
provocations" by North Korea, which last week threatened a pre-emptive nuclear strike against the US. Secretary Hagel’s plans
included deploying 14 new anti-missile interceptors at Fort Greely, AK and a second missile-defense radar in Japan.
On February 12, Italian police arrested Finmeccanica Chairman and CEO, Giuseppe Orsi on allegations that while heading the
Company’s AugustaWestland unit he bribed Indian officials to secure the sale of 12 helicopters, a deal valued at a $753 million.
After a series of embarrassing malfunctions including an onboard fire stemming from battery issues, the Boeing 787 Dreamliner fleet
was grounded globally by aviation authorities on January 16. Solutions to the problem are currently undergoing testing.
The CEOs of CACI and Spirit AeroSystems were replaced by former Lockheed Martin executives. In February, CACI’s board replaced
Dan Allen with Ken Asbury after just one year and in March, Spirit announced that Larry Lawson would replace Jeff Turner.
Quarterly Industry Snapshot
Source: Public Filings; Capital IQ as of 03/31/13
2
First Quarter 2013
53 42 4829
4746 45
4543
52
5951
74
2010 2011 2012 2013
Q1 Q2 Q3 Q4
Quarterly Aerospace Transaction Activity
M&A Analysis
TMG tracked 29 announced Defense and Government Services sector
transactions and 27 Aerospace transactions during 2013’s first quarter.
Transaction activity in both sectors declined significantly vs. Q4 2012,
when an unusually high level of activity reflected companies’ race to
close transactions before 2013 tax hikes took effect. Continued market
uncertainty, exacerbated by Sequestration, also dampened deal
volume vs. prior quarters. During Q1 2013, financial buyers accounted
for 36% of Aerospace, Defense, and Government Services M&A
activity vs. 29% in 2012. The decrease in transaction volume, lack of
material share repurchase or special dividends as well as an increase
in financial buyer activity suggest that in Q1 strategic buyers were
largely holding onto “dry powder”.
The Defense and Government Services sector saw considerable Q1
2013 international deal activity as strategics sought to “buy growth”
outside the US due to US budgetary constraints and a weaker
domestic economy. Both Cubic and Teledyne acquired internationally
with respective purchases of Australia based, PS Management
Consultants and Denmark based Reson A/S. J.F. Lehman was a very
active financial buyer, announcing two acquisitions: IMECO, Inc. and,
through portfolio Company Drew Marine, Alexander/Ryan Marine &
Safety Co. Inc.
Aerospace sector activity was most noteworthy for Curtiss-Wright’s
and Moog’s Q1 2013 announcements of two acquisitions each.
Meanwhile, Arlington Capital’s acquisition of MB Aerospace
represented its first foray into the sector. Arlington Capital plans to
operate MB Aerospace as a global platform in aerospace
manufacturing, engineering and supply chain management, with future
acquisitions likely.
Defense and Government Services Transaction Activity
Source: InfoBase; Capital IQ as of 03/31/13
???
27
40
28
3229
Q1 2013Q4 2012Q3 2012Q2 2012Q1 2012
3
First Quarter 2013 Industry Trends (Defense and Gov. Services)
Source: Public Filings; Industry Newswires and Capital IQ as of 03/31/13
Company Since Feb 28 YTD
3.7% 1.8%
6.1% 5.6%
9.7% 4.6%
6.8% 3.8%
7.7% 2.1%
5.0% -3.4%
14.0% 5.2%
2.5% 22.9%
8.3% 3.6%
14.6% 19.7%
S&P 500 3.6% 10.0%
Stock Performance
Operating Performance
YOY Revenue Operating Margin2
Index Change1 CY2011 CY2012
Defense Prime (1.4%) 11.6% 10.5%
Gov. Services 0.9% 6.4% 7.0%
Def. Systems (0.6%) 11.8% 11.7%
Middle Market 5.5% 6.0% 5.8%
1Calculated on total index revenue of CY2012 & CY2011
2Displays the median operating margin of the index
Sequestration dominated the headlines in 2013’s first quarter while remaining the
fundamental issue influencing government contractors today. On March 1, President
Obama issued an order putting sequestration into effect. Shortly after, the House and
Senate agreed to a continuing resolution (CR) to fund federal agencies through
September 30, 2013, maintaining sequestration but avoiding a government shutdown.
The CR extends the federal civilian workers’ pay freeze for a third consecutive year
and specifies funding for several key agencies’ respective appropriations bills.
Congress now turns its focus to the FY 2014 budget while agencies face a continuing
challenge: cut costs to meet sequestration imperatives. As a result, nearly every
agency will face furloughs of unknown scope and scale.
Meanwhile, equity markets are thriving in the post-sequestration economy. Since
sequester cuts began on March 1, our Defense Prime, Government Services and
Middle Market custom indices have risen 7.0%, 7.2% and 10.8%, respectively and 15
of our 21 custom index companies have outperformed the S&P’s 3.6% gain. Our
Government Systems Index – our sole S&P underperformer – rose 1.5%.
From an operating perspective, corporate earnings reflected a difficult business
environment. Most of our custom index companies reported flat or declining YOY
CY2012 revenues. Only our Middle Market index reported substantial growth.
Additionally, with the exception of Government Services, our custom indices’ median
operating margins all declined YOY.
Looking forward, budget discussions will continue to influence government
contractors. In addition, escalating threats by North Korea likely will impact missile
defense discussions and budgeting. The US recently demonstrated its commitment to
missile defense on several fronts, including its deployment of a THAAD anti-missile
defense system in Guam, reaffirming its ability and its determination to deploy funding
rapidly in response to geopolitical exigencies.
4
First Quarter 2013
3/31/2013 A320 Family A330/A340/A350 A380
4,948 3,889 898 161
Industry Trends (Aerospace)
Company Orders as of Unfilled Orders by Aircraft Model Total Orders
3/31/2013 737 747 767 777 787
4,445 3,125 64 64 352 840
Boeing began 2013 by reclaiming the title of World’s No. 1 Airplane Manufacturer from Airbus for the first time in a decade, having delivered
585 commercial jets in 2012. During 2012, Boeing’s backlog swelled to more than $390 billion. Despite its great start to 2013, Boeing took a
hit when defective lithium ion batteries in its new 787 Dreamliner grounded the aircraft worldwide. Boeing’s new battery system has been
tested successfully under “normal and non-normal flight conditions” and Boeing has yet to witness 787 cancelations. Meanwhile, Boeing
737 sales witnessed continuing growth in 2013 when it signed a huge, 200 plane order with Ireland’s Ryanair, valued at $18 billion.
In the civilian space, Airbus closed 2012 with an industry
record setting backlog of 4,583 aircraft valued at more than
$638 billion (based on list prices). Sales largely were
driven by 1,734 bookings in Airbus’ single aisle A320
family along with sales of 58 A330s, 27 A350s and 9
A380s. Airbus has maintained its momentum in 2013 by
winning the largest order in aircraft industry history: a $24
billion, 234 aircraft purchase by Indonesia's Lion Air.
Drones continued to dominate headlines this quarter. Controversy surrounding the use of lethal drones swirled during nomination hearings
of newly appointed CIA Director John Brennan. In the wake of those hearings, the CIA’s lethal targeting program likely will be transferred to
DoD. Most recently, the Navy announced the launch of its highly anticipated Unmanned Carrier-Launched Airborne Surveillance and Strike
(UCLASS) system. The Navy will pay Boeing, General Atomics, Lockheed Martin and Northrop Grumman to provide the technical specs for
their respective designs for a stealthy, jet-powered, lethal drone designed to be deployed from aircraft carriers and to fly alongside the latest
manned fighters. The winning design, scheduled to be announced in 2015, will serve as the program’s backbone. Conversely, the market
for smaller surveillance drones continues to decline, hobbled by a shrinking US military presence in the Middle East, decreased defense
spending and a limited domestic market. AeroVironment, once the Pentagon’s top drone supplier, saw its share price fall 20.0% during Q1
due to poor Q4 earnings results and its severe dependency on federal spending.
X-47 Sea Avenger Sea Ghost Phantom Ray
5
First Quarter 2013
GD
Raytheon
Lockheed
Teledyne
Harris
Northrop
L-3
Booz
CACI
CSC
KEYW
FLIR
ManTech
ICF Exelis
Kratos
SAIC
VSE
-30.0%
30.0%
-9.0% 9.0%
EPS
Revenue
Company Quarter
Ending Revenue EPS
12/31/2012 -8.3% -26.5%
12/31/2012 2.8% 6.1%
12/31/2012 8.4% -4.9%
12/31/2012 2.3% 22.3%
12/31/2012 0.4% 23.1%
12/31/2012 -2.6% 8.6%
12/31/2012 -2.9% 3.0%
12/28/2012 0.8% 24.2%
12/31/2012 -8.2% -19.1%
01/31/2013 0.0% 5.9%
12/31/2012 -1.0% -32.9%
12/31/2012 1.1% 0.0%
12/31/2012 -2.4% 4.0%
12/28/2012 -1.5% 4.2%
12/30/2012 2.8% 8.3%
12/31/2012 -2.3% -66.7%
12/31/2012 -0.7% 0.0%
12/31/2012 -2.6% 0.0%
12/30/2012 1.2% 25.0%
12/31/2012 0.4% 36.4%
12/31/2012 -7.7% 7.0%
Most Recent Quarterly Financial Results (Defense and Gov. Services)
Most Recent Quarterly Earnings Suprise1
Source: Public Filings; Capital IQ as of 03/31/13
GD
Raytheon
Lockheed
Teledyne
Harris
Northrop
L-3
Booz
CACI
CSC
KEYW
FLIR
ManTech
ICF Exelis
ITT
Kratos
SAIC
VSE
-30.0%
30.0%
-9.0% 9.0%
EPS
Revenue
DRCO
GD
Raytheon
Lockheed
Teledyne
Harris
Northrop
L-3
Booz
CACI
CSC
KEYW
FLIR
ManTech
ICF Exelis
ITT
Kratos
SAIC
VSE
-30.0%
30.0%
-9.0% 9.0%
EPS
Revenue
NCIT
GD
Raytheon
Lockheed
Teledyne
Harris
Northrop
L-3
Booz
CACI
CSC
KEYW
FLIR
ManTech
ICF Exelis
ITT
Kratos
SAIC
VSE
-30.0%
30.0%
-9.0% 9.0%
EPS
Revenue
Cubic
Defense Prime IndexDefense Systems IndexGovernment Services IndexMiddle Market Index
Most Recent Quarterly Earnings Suprise1
1Earnings Surprise is calculated as the difference of a Company’s most recent
quarterly financial results from Capital IQ analyst consensus estimates
6
First Quarter 2013
PCP
Boeing
Hexcel
Spirit
B/E
Triumph
AstronicsLMI
Rockwell
HEICOWesco
UTC
Ametek
AAR
Curtis-WrightTextron
Bombardier
Moog
-15.0%
15.0%
-6.0% 6.0%
EPS
Revenue
Company Quarter
Ending Revenue EPS
12/31/2012 -3.2% 2.1%
12/31/2012 4.1% 1.4%
12/31/2012 0.3% 8.5%
12/31/2012 -5.5% -9.1%
12/30/2012 -2.6% -6.1%
12/31/2012 2.2% 4.4%
12/29/2012 -1.9% -12.3%
12/31/2012 -1.0% 1.0%
02/28/2013 2.8% 4.5%
12/31/2012 -0.5% -12.9%
01/25/2013 -1.7% 33.3%
12/31/2012 -1.3% -5.3%
12/29/2012 -2.2% -7.4%
12/31/2012 -1.0% 38.1%
12/31/2012 4.6% 4.9%
12/31/2012 -1.0% 3.5%
01/26/2013 -47.0% -55.3%
12/31/2012 -4.8% -5.1%
11/30/2012 12.6% 0.0%
12/31/2012 12.2% 28.6%
12/31/2012 4.6% 157.1%
01/31/2013 -4.8% -7.5%
12/31/2012 -0.5% -5.0%
12/31/2012 -2.6% -7.4%
Most Recent Quarterly Financial Results (Aerospace)
Source: Public Filings; Capital IQ as of 03/31/13
PCP
Boeing
Hexcel
Spirit
B/E
Triumph
AstronicsLMI
Rockwell
HEICOWesco
UTC
Ametek
AAR
Curtis-WrightTextron
Bombardier
Moog
-15.0%
15.0%
-6.0% 6.0%
EPS
Revenue
Esterline
PCP
Boeing
Hexcel
Spirit
B/E
Triumph
AstronicsLMI
Rockwell
HEICOWesco
UTC
Ametek
AAR
Curtis-WrightTextron
Bombardier
Moog
-15.0%
15.0%
-6.0% 6.0%
EPS
Revenue
Orbital
GD
Raytheon
Lockheed
Teledyne
Harris
Northrop
L-3
Booz
CACI
CSC
KEYW
FLIR
ManTech
ICF Exelis
ITT
Kratos
SAIC
VSE
-30.0%
30.0%
-9.0% 9.0%
EPS
Revenue
AVAV
GD
Raytheon
Lockheed
Teledyne
Harris
Northrop
L-3
Booz
CACI
CSC
KEYW
FLIR
ManTech
ICF Exelis
ITT
Kratos
SAIC
VSE
-30.0%
30.0%
-9.0% 9.0%
EPS
Revenue
Digital Globe
GD
Raytheon
Lockheed
Teledyne
Harris
Northrop
L-3
Booz
CACI
CSC
KEYW
FLIR
ManTech
ICF Exelis
ITT
Kratos
SAIC
VSE
-30.0%
30.0%
-9.0% 9.0%
EPS
Revenue
Gilat
GD
Raytheon
Lockheed
Teledyne
Harris
Northrop
L-3
Booz
CACI
CSC
KEYW
FLIR
ManTech
ICF Exelis
ITT
Kratos
SAIC
VSE
-30.0%
30.0%
-9.0% 9.0%
EPS
Revenue
Gencorp
Large Cap Aerospace IndexMid Cap Aerospace IndexSmall Cap Aerospace Index
Most Recent Quarterly Earnings Suprise1 Most Recent Quarterly Earnings Suprise1
1Earnings Surprise is calculated as the difference of a Company’s most recent
quarterly financial results from Capital IQ analyst consensus estimates
7
First Quarter 2013
Defense
Systems Index 81% 85% 96% 89% 100%
Defense Prime
Index 95% 99% 100% 98% 99%
Capital Markets: Overview (Defense and Gov. Services)
Last 52 Weeks Custom Index Performance
Government
Services Index 70% 92% 97% 77% 99%
Middle Market
Index 61% 98% 98% 81% 61% 95%
Index Constituents and Stock Price as a % of 52 Week High
Source: Public Filings; Capital IQ as of 03/31/13
6.7%
15.6%
15.5%
5.3%
11.4%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Mar 2012 Apr 2012 May 2012 Jun 2012 Jul 2012 Aug 2012 Sep 2012 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013 Mar 2013
Defense Prime Index Government Services Index
Middle Market Defense & Government Services Index Defense Systems Index
S&P 500 Index
8
First Quarter 2013
13.4%
5.4%4.8%
11.4%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Mar 2012 Apr 2012 May 2012 Jun 2012 Jul 2012 Aug 2012 Sep 2012 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013
Large Cap Aerospace Index Mid Cap Aerospace Index Small Cap Aerospace Index S&P 500 Index
Capital Markets: Overview (Aerospace)
Last 52 Weeks Custom Index Performance
Large Cap
Aerospace
Index 100% 100% 99% 93% 97% 98% 95% 99%
Mid Cap
Aerospace
Index 90% 92% 97% 96% 97% 99% 73% 98%
Small Cap
Aerospace
Index 65% 84% 96% 95% 92% 91% 90% 87%
Index Constituents and Stock Price as a % of 52 Week High
Source: Public Filings; Capital IQ as of 03/31/13
9
First Quarter 2013
(10.9%)
(5.4%)
(3.4%)
(3.4%)
0.0%
1.8%
1.9%
2.0%
2.1%
3.2%
3.6%
3.8%
4.6%
5.2%
5.6%
10.0%
16.0%
16.6%
19.7%
20.5%
22.9%
27.1%
(20%) (10%) 0% 10% 20% 30% 40%
Cubic
Harris
Booz
Exelis
Kratos
General Dynamics
Dynamics Research
VSE
Raytheon
NCI
ManTech
Northrop
Lockheed
CACI
L-3
S&P 500
ICF
FLIR
SAIC
Teledyne
CSC
KEYW
First Quarter 2013
(38.2%)
(24.3%)
(22.0%)
(21.1%)
(13.0%)
(9.6%)
(7.1%)
(5.8%)
(3.9%)
0.7%
2.7%
2.8%
2.8%
7.2%
7.4%
11.4%
11.4%
14.3%
14.8%
24.4%
64.4%
108.1%
(75%) (50%) (25%) 0% 25% 50% 75% 100% 125%
Dynamics Research
NCI
ManTech
Booz
Exelis
Cubic
CACI
Kratos
General Dynamics
VSE
SAIC
FLIR
Harris
ICF
Lockheed
Raytheon
S&P 500
L-3
Northrop
Teledyne
CSC
KEYW
Last 52 Weeks
Capital Markets: Stock Performance (Defense and Gov. Services)
Defense Prime Index Government Services Index Defense Systems Index
Middle Market Defense & Government Services Index S&P 500 Index
Source: Public Filings; Capital IQ as of 03/31/13
10
First Quarter 2013
(16.6%)
(3.0%)
(1.6%)
0.1%
5.7%
7.2%
7.3%
7.5%
7.6%
8.5%
10.0%
11.4%
11.7%
11.9%
13.9%
13.9%
15.4%
18.3%
19.0%
20.2%
20.3%
21.2%
22.0%
30.3%
45.4%
(30%)(20%)(10%) 0% 10% 20% 30% 40% 50%
AeroVironment
HEICO
AAR
Percision Castparts
Curtis-Wright
Bombardier
Gilat
LMI Aerospace
Hexcel
Rockwell Collins
S&P 500
Wesco Aircraft Holdings
Moog
Spirit AeroSystems
Boeing
UTC
Ametek
DigitalGlobe
Esterline
Triumph
Textron
Orbital Sciences
B/E Aerospace
Astronics
GenCorp
First Quarter 2013
(32.4%)
(22.4%)
(14.7%)
(9.1%)
(6.2%)
(2.7%)
0.8%
5.2%
5.9%
6.9%
7.1%
9.7%
9.7%
11.4%
12.6%
14.2%
15.4%
20.8%
25.3%
26.9%
29.7%
34.1%
41.1%
87.3%
116.7%
(60%) (30%) 0% 30% 60% 90% 120% 150%
AeroVironment
Spirit AeroSystems
Astronics
Wesco Aircraft Holdings
Curtis-Wright
Bombardier
AAR
HEICO
Esterline
Moog
Textron
Rockwell Collins
Percision Castparts
S&P 500
UTC
LMI Aerospace
Boeing
Hexcel
Triumph
Orbital Sciences
B/E Aerospace
Ametek
Gilat
GenCorp
DigitalGlobe
Last 52 Weeks
Capital Markets: Stock Performance (Aerospace)
Large Cap Aerospace Mid Cap Aerospace Small Cap Aerospace Index
Source: Public Filings; Capital IQ as of 03/31/13
11
First Quarter 2013
2.3%
2.0%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Mar 2012 Apr 2012 May 2012 Jun 2012 Jul 2012 Aug 2012 Sep 2012 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Jan 2013 Feb 2013 Mar 2013
Defense and Government Services Aerospace
Short Interest (Aerospace, Defense and Gov. Services)
Last 52 Week Median Short Interest
Defense and Government Services
1.5% 5.3% 2.5% 4.7% 1.9% 1.9% 16.4% 2.0%
9.8% 3.7% 0.3% 2.0% 11.6% 8.3% 0.5% 1.2%
2.1% 1.4% 2.9% 4.4% 2.0%
Aerospace
0.6% 0.8% 1.3% 0.0% 0.8% 6.0% 6.3% 1.2%
3.9% 1.3% 1.7% 5.0% 2.3% 2.6% 0.7% 3.7%
4.2% 1.9% 16.6% 2.3% 0.0% 3.7% 1.6% 1.5%
Short Interest as of March 28, 2013
Source: Public Filings; Capital IQ as of 03/31/13
12
First Quarter 2013
Defense Systems Index
3x LTM EBITDA $425.3 $2,130.0 $1,100.5 $3,361.8 $990.6
Less LT Debt 32.4 649.0 248.3 1,929.9 558.2
Plus Cash 174.1 292.0 321.7 328.1 45.8
Dry Powder $567.0 $1,773.0 $1,174.0 $1,760.0 $478.2
Middle Market Defense & Government Services Index
3x LTM EBITDA $93.0 $269.3 $86.9 $306.6 $52.9 $219.8
Less LT Debt 89.1 105.0 89.7 650.6 17.5 168.3
Plus Cash 0.0 14.7 5.6 49.0 0.8 1.5
Dry Powder $3.9 $179.0 $2.9 ($295.0) $36.2 $53.0
Defense Prime Index
3x LTM EBITDA $11,208.0 $4,806.0 $15,579.0 $10,920.0 $10,032.0
Less LT Debt 3,909.0 3,653.0 6,308.0 3,935.0 4,731.0
Plus Cash 3,296.0 349.0 1,898.0 3,862.0 3,188.0
Dry Powder $10,595.0 $1,502.0 $11,169.0 $10,847.0 $8,489.0
Government Services Index
3x LTM EBITDA $1,572.0 $1,008.0 $5,490.0 $674.2 $2,694.0
Less LT Debt 1,726.4 706.0 2,629.0 200.0 1,298.0
Plus Cash 317.6 37.5 2,198.0 134.9 736.0
Dry Powder $163.2 $339.5 $5,059.0 $609.1 $2,132.0
Dry Powder Calculations (Defense and Gov. Services)
($ millions)
Source: Public Filings; Capital IQ as of 03/31/13
13
First Quarter 2013
Mid Cap Aerospace Index
3x LTM EBITDA $656.1 $823.6 $1,071.6 $874.5 $1,025.8 $456.0 $351.3 $2,020.4
Less LT Debt 722.8 880.2 814.4 256.6 759.2 150.7 1,176.2 1,174.9
Plus Cash 47.4 112.0 202.8 32.6 152.1 232.3 440.7 33.5
Dry Powder ($19.3) $55.4 $460.0 $650.5 $418.8 $537.6 ($384.2) $879.0
Small Cap Aerospace Index
3x LTM EBITDA $139.2 $118.6 $186.3 $689.4 $88.9 $577.3 $119.3 $513.1
Less LT Debt 0.0 30.2 708.1 483.6 52.2 254.9 260.7 617.4
Plus Cash 64.0 7.4 140.7 246.2 67.0 19.1 4.3 39.7
Dry Powder $203.2 $95.8 ($381.1) $452.0 $103.6 $341.5 ($137.1) ($64.6)
Dry Powder Calculations (Aerospace)
Large Cap Aerospace Index
3x LTM EBITDA $2,554.0 $1,896.6 $23,550.0 $3,012.0 $6,667.8 $3,213.0 $4,101.0 $29,043.0
Less LT Debt 1,453.8 1,960.5 10,409.0 5,405.0 3,825.7 1,122.0 3,995.0 23,221.0
Plus Cash 158.0 513.7 10,341.0 2,896.0 483.3 337.0 1,378.0 4,819.0
Dry Powder $1,258.2 $449.8 $23,482.0 $503.0 $3,325.4 $2,428.0 $1,484.0 $10,641.0
($ millions)
Source: Public Filings; Capital IQ as of 03/31/13
14
First Quarter 2013
Closed Closed Closed
January 2, 2013 January 2, 2013 January 2, 2013
Notes Notes Notes
Moog acquired Broad Reach
Engineering Company (BRE), a
leading designer and manufacturer
of spaceflight electronics and
software located in Golden, CO.
The transaction adds to Moog’s
space products portfolio and
provides a team of experienced
individuals. The purchase price
was $48.0 million, including $37.0
million in cash, a $6.0 million note
payable and a $5.0 million potential
earn out payment.
Heilind Electronics, Inc. acquired
Interstate Connecting Components
(ICC), a New Jersey-based
distributor of electronic components
for the military and aerospace
industries. ICC, founded in 1985,
sells to leading defense contractors
and commercial manufacturers
world-wide, serving first-, second-,
and third-tier OEMs in the
aerospace, shipbuilding, avionics,
telecommunications, and broadcast
markets.
CACI International acquired IDL
Solutions, Inc., a leading provider
of Information Technology (IT)
solutions, applications and
mission-critical systems support to
healthcare IT clients and other
civilian agencies. IDL Solutions has
over 100 employees and leverages
"big data" analytics to help
healthcare organizations gain new
insights from large volumes of
health data.
has acquired has acquired has acquired
MRO Business
Source: Capital IQ and InfoBase as of 03/31/13
Selected First Quarter Transaction Activity
15
First Quarter 2013
Closed Closed Closed
January 3, 2013 January 3, 2013 January 4, 2013
Notes Notes Notes
The Berger Group acquired
Hawthorne Services, Inc.
Hawthorne Services is a provider
of full lifecycle aircraft fuel services
and facilities operations and
maintenance services across the
southeast United States for the
Defense Logistics Agency-Energy
(DLA-E) and the state of South
Carolina. The acquisition follows
the 2012 Berger Group acquisition
of the enterprises that now form
Louis Berger Services, Inc.
PRV Aerospace, LLC, a portfolio
company of Court Square Capital
Partners, acquired all of the
outstanding stock of Astro Spar,
Inc. Astro Spar is a manufacturer of
complex, precision-machined
components and assemblies for the
commercial and military aerospace
industries. The Company’s products
are manufactured using aluminum
alloys and include spars, door
beams, stringers, webs, chords,
longerons, chines, wing formers
and seat tracks.
J.F. Lehman announced that
certain of its investment affiliates
have acquired IMECO, Inc., a
leading provider of turnkey marine
electro-mechanical solutions for
US Government and commercial
customers. The Company's
integrated maritime solutions
include the design, engineering,
planning, procurement and
installation of HVAC, cargo
handling, electric steering,
propulsion and fire suppression
systems.
has acquired has acquired has acquired
MRO Business
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
16
First Quarter 2013
Closed Closed Closed
January 6, 2013 January 7, 2013 January 7, 2013
Notes Notes Notes
The Riverside Company acquired
Bohemia Interactive Simulations.
Bohemia is a developer and
provider of games for training
technology and interactive
simulation systems sold to
defense, emergency and mission-
critical customers. Bohemia
supplies the U.S. Department of
Defense, UK Ministry of Defense,
Australian Defense Force and a
range of other international clients.
Vistronix acquired Technology
Associates International
Corporation. Technology
Associates provides IT support
services to the Marine Corps, Navy,
Air Force, Department of Health
and Human Services and U.S.
Strategic Command. The Company
develops highly specialized
geospatial and data visualization
software applications and systems.
CRGT Inc., a Veritas Capital
portfolio company, acquired
Guident Technologies, Inc. Guident
provides end-to-end data analytics
strategy and planning services,
along with data warehouse, data
management and business
analytics solutions. Guident’s
customers include the EPA, DOT,
SEC and the U.S. Patent and
Trademark Office.
has acquired has acquired has acquired
MRO Business
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
17
First Quarter 2013
Announced Closed Closed
January 7, 2013 January 9, 2013 January 9, 2013
Notes Notes Notes
Lockheed Martin announced its
acquisition of certain assets of the
engine maintenance, repair and
overhaul (MRO) business of Aveos
Fleet Performance, Inc., located in
Montreal, Canada. The assets will
provide capabilities to perform a
range of services on the CF34 and
CFM56 engine families and the
Airbus 320 family.
Behrman Capital acquired Tresys
Technology, a provider of
cybersecurity products, services
and solutions to government and
commercial customers. Tresys
offers services and products that
address computer network defense,
focusing primarily on platform
security, assured information
sharing and security engineering.
ManTech acquired Alta Systems,
Inc., an IT and professional
services company with applications
in healthcare systems and capital
planning. ALTA provides a broad
range of IT and professional
services to government and private
industry in three major practice
areas: capital planning and
investment control; system design,
development and operation; and
fraud detection and statistical
analysis.
plans to acquire has acquired has acquired
MRO Business
Certain Assets of
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
18
First Quarter 2013
Announced Closed Announced
January 10, 2013 January 10, 2013 January 14, 2013
Notes Notes Notes
EIT, LLC announced its acquisition
of Suntron Corp’s Methuen, MA
manufacturing facility. The facility,
which has an aerospace
certification, represents the last of
Suntron’s manufacturing capability.
The sale allows Suntron to better
focus on its high reliability and
mission and safety critical
customers in key industries
including defense, aerospace, and
medical devices. The addition of
the facility will add to EIT’s
manufacturing capabilities and
grow its presence in the Northeast.
Web Industries acquired CAD Cut,
Inc. Based in Vermont, CAD Cut
utilizes the latest in computer
controlled laser and knife cutting
systems and specializes in
providing composite ply kits to
aerospace, aviation, defense, and
industrial markets. Synergies are
especially strong in the aerospace
sector, where Web is a recognized
leader in providing precision
composite slit tape for automated
manufacturing.
Curtiss-Wright Corp. announced its
acquisition of German based
Phönix Group in a $106 million
cash deal. Founded in 1910,
Phönix Group is a leading designer
and manufacturer of high
performance valves and related
support services to global
chemical, petrochemical and power
markets. Phönix will become part
of Curtiss-Wright's Flow Control
segment and expand Curtiss-
Wright's severe-service valve
franchise into new markets.
plans to acquire has acquired plans to acquire
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
19
First Quarter 2013
Announced Closed Closed
January 15, 2013 January 18, 2013 January 21, 2013
Notes Notes Notes
Cubic Defense Australia, the
Australian-based defense systems
business of Cubic Corporation
agreed to acquire PS Management
Consultants Pty Ltd (PSMC), an
Australian defense firm with strong
ties to the training, simulation,
communications, and range safety
customers. This was Cubic’s
second training and simulation
acquisition in a month (it acquired
NEK Special Programs Group on
December 17th 2012).
The Atlas Group, a portfolio
company of PE firm Graham
Partners, acquired Brenner
Aerostructures, LLC. Brenner
specializes in bonding metals,
anodizing of phosphoric acids, and
stretch-forming for the aerospace
industry. The bolt-on acquisition is
expected to help Atlas win new
business, in-source production, and
streamline complex assemblies.
AtHoc, Inc. acquired Alerting
Solutions, Inc., (ASI) a provider of
warning systems for homeland
security and infrastructure
protection used by national, state
and local governments around the
world. The ASI acquisition extends
AtHoc’s product offerings, which
combine the latest advances in
mobile, cloud, multi-media and
social networks to enable unified
emergency communications for the
defense, homeland security and
government markets.
plans to acquire has acquired has acquired
PS Management
Consultants Pty Ltd
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
20
First Quarter 2013
Closed Closed Closed
January 23, 2013 January 23, 2013 January 24, 2013
Notes Notes Notes
Network Designs, Inc. (NDi)
announced that it has successfully
completed a merger with cyber
security experts, BitSec Global
Forensics. Beginning immediately,
BitSec will operate as a division of
NDi, expanding NDi’s cyber
solutions to the commercial and
government market. BitSec Global
Forensics is a worldwide leader in
digital forensics, electronic
discovery, data breach
investigations, and training. The
merger brings almost two decades
of combined experience to NDi.
Greenwich AeroGroup, Inc., a
Berkley Capital portfolio company,
acquired Aero Precision Industries,
LLC. Aero Precision is based in
Livermore, CA and is a leading
supplier of aftermarket original
equipment manufacturer (OEM)
parts, systems and custom logistic
support services for military aircraft
operators worldwide. The
acquisition expands AeroGroup’s
capabilities in international military
and government markets.
Kidd & Company, LLC (KCO), in
collaboration with Centerfield
Capital Partners, acquired
Imaginetics, Inc. Based in Auburn,
WA, Imaginetics manufacturers
precision metal components and
assemblies for the aerospace
industry. The Company’s current
customer base includes Boeing
Commercial Airplanes, Boeing
Defense Services, Hexcel
Corporation, Spirit Aerosystems
and Zodiac Aerospace, among
others.
has merged with has acquired has acquired
&
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
21
First Quarter 2013
Closed Closed Closed
January 28, 2013 January 28, 2013 January 31, 2013
Notes Notes Notes
TriMas Corporation acquired
Martinic Engineering, Inc. for $19
million. Founded in 1978 and
located in Stanton, California,
Martinic manufactures highly-
engineered, precision machined,
complex parts for commercial and
military aerospace applications,
including auxiliary power units, as
well as electrical, hydraulic and
pneumatic systems. Martinic
generated approximately $13
million in revenue for 2012.
DC Capital Partners acquired
Computer Security Solutions, Inc.
(CompSec). CompSec is an IT
solutions provider based in
McLean, VA supporting the
Intelligence Community (IC) and
Washington DC based agencies.
The deal is expected to expand
CompSec’s customer base through
relationships with existing
companies in D.C. Capital's
portfolio. The McLean Group
served as the exclusive M&A
advisor to CompSec.
Carlyle Group portfolio company,
Dynamic Precision Group,
acquired Paradigm Precision
Holdings (PPH) from American
Capital Ltd. PPH is a
Massachusetts based provider of
highly engineered components for
turbine engines serving the
commercial aerospace, defense
and energy end markets. PPH’s
manufacturing capabilities include
a diverse range of turbine engine
products, close tolerance parts and
multi-level, highly complex
assemblies.
has acquired has acquired has acquired
Martinic
Engineering, Inc.
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
22
First Quarter 2013
Closed Closed Closed
February 4, 2013 February 13, 2013 February 15, 2013
Notes Notes Notes
Drew Marine, a portfolio company
of J.F. Lehman, acquired
Alexander/Ryan Marine and Safety
Inc. Alexander/Ryan is a
manufacturer and distributor of fire,
safety and rescue equipment to the
Offshore and Marine markets.
Alexander/Ryan offers a variety of
high quality products and services,
including personal protection,
lifesaving and firefighting
equipment, life raft systems, new
survival craft, survival craft
refurbishment and technical field
services.
Laird PLC acquired Nextreme
Thermal Solutions, Inc., through its
subsidiary Laird Technologies, Inc.
Nextreme is a Durham, NC based
manufacturer of thin-film
thermoelectric modules and
subsystems. The Company’s
defense/aerospace technology
applications include thermoelectric
cooling for next-generation imaging
sensors. Laird will acquire 100% of
the equity of Nextreme in an all
earn out deal.
Precision Castparts Corp. (PCP)
cquired Protective Coatings, Inc.
(Pro-Coat), a supplier of decorative
and protective finishes for
aerospace, automotive and other
products. Pro-Coat is based in
Portland, Oregon and has 300
employees. Over the years, PCP
has acquired a number of
aerospace subcontractors in the
Portland region that were
customers of Pro-Coat. The terms
of the transaction were not
disclosed.
has acquired has acquired has acquired
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
23
First Quarter 2013
Announced Announced Closed
February 20, 2013 February 22, 2013 February 23, 2013
Notes Notes Notes
The Dewey Electronics
Corporation announced that it has
signed a definitive agreement to
purchase certain assets, rights of
manufacture and intellectual
property from Goodman Ball
Incorporated, a maker of military
equipment that is based in Menlo
Park, California. The purchase of
these assets is part of the ongoing
liquidation of Goodman Ball by its
parent company, C.E. Niehoff &
Co.
Tactical Air Defense Services, Inc.
(TADF) announced it has entered
into an agreement to acquire Air 1
Flight Support, Inc. Air 1 is a
privately-held, Florida based
provider of aircraft maintenance,
refueling, and other support
services to the military and
commercial aircraft industry. TADF
will purchase 100% of the
outstanding shares of Air 1 for
consideration of 5,000,000 shares
of its Series C Preferred stock.
Boeing acquired CPU Technology,
Inc.’s Acalis business. Acalis
provides security-on-a-chip
defending manned and unmanned
aircraft from malware, cloning and
other cyber threats to an aircraft's
systems. Acalis will be integrated
into Boeing Military Aircraft's
Global Strike division. The Acalis
business employs approximately
40 people and is based in
California. CPU Technology was
privately-held and terms of the
transaction were not disclosed.
plans to acquire plans to acquire has acquired
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
24
First Quarter 2013
Closed Closed Closed
February 28, 2013 March 1, 2013 March 4, 2013
Notes Notes Notes
Bulova Technologies Group, Inc.
announced that it received a
significant investment in the form of
both equity and debt through NFC
III, LLC associated with National
Financial Companies, LLC. As part
of the transaction, NFC III, LLC will
appoint two Directors to the
Bulova's Board of Directors.
Teledyne Technologies acquired
RESON A/S, a provider of high-
resolution marine acoustic imaging
and measurement solutions.
RESON’s multibeam sonar systems
range from portable high-resolution
shallow water systems used on
autonomous underwater vehicles
(AUVs) to full ocean depth vessel
mounted oceanographic systems.
The transaction marks Teledyne’s
third acquisition in the last twelve
months focused on 3D imaging.
.
RBC Bearings, Inc. acquired
Western Precision Aero, LLC
(WPA), a privately-held, California-
based manufacturer of precision
components and gears for
aerospace and industrial markets.
The transaction was valued at $2.6
million. WPA's 2012 net sales were
approximately $5.0 million. The
acquisition advances RBC’s
strategy of expanding its product
portfolio into the aerospace and
industrial markets.
has acquired has acquired has acquired
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
25
First Quarter 2013
Closed Closed Announced
March 4, 2013 March 8, 2013 March 14, 2013
Notes Notes Notes
MacAulay-Brown acquired IP and
other assets of Luna Innovations’
Secure Computing &
Communications (SCC) division.
SCC conducts electronic
component R&D and provides
technical services on critical US
military and National Security
applications. SCC and its
employees will be integrated
immediately MacAulay-Brown’s
Advanced Technology Group.
Parsons acquired First Support
Services, Inc., a wholly owned
subsidiary of FirstGroup. First
Support Services is a leading
provider of facility operations and
maintenance (O&M) services,
logistics support, transportation
support, and telecommunications
operations services to the US
government. First Support Services
has more than 175 employees and
more than $50 million in annual
revenues.
Precision Castparts announced its
definitive agreement to acquire the
metallic rods business of Sweden’s
SKF Group for $52 million. The
metallic rods business, as part of
SKF's aerospace segment,
includes operations at SKF sites in
St. Vallier sur Rhône, France and
Monroe, Washington in the US.
The acquisition supports PCP’s
strategy of further developing its
composite technology.
has acquired has acquired plans to acquire
Secure Computing & Communications Division Metallic Rods Business
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
26
First Quarter 2013
Announced Closed Closed
March 18, 2013 March 18, 2013 March 18, 2013
Notes Notes Notes
Greenbriar Equity Group
announced its definitive agreement
to acquire EDAC Technologies for
$104.1 million in cash. EDAC
designs and manufactures jet
engine parts as well as equipment
gauges and special tooling for
engine assembly, manufacturing
and inspection. Greenbriar is
paying $17.75 per share, a 30%
premium over EDAC's average
closing price during the 90 trading
days ending March 15.
Arlington Capital Partners acquired
MB Aerospace Holdings Ltd from
UK private equity group LDC Ltd.
MB Aerospace provides supply
chain integration services and
manufactures and repairs aero
engine components. This was
Arlington Capital’s first overseas
acquisition. Transaction terms
were not disclosed.
Triumph Group, Inc. announced it
will acquire Goodrich Pump &
Engine Control Systems (GPECS)
from United Technologies Corp
(UTC). GPECS supplies aerospace
fuel systems for commercial,
military, helicopter and business jet
markets. The sale of GPECS was
one of the divestitures required as
a condition of UTC’s acquisition of
Goodrich. Triumph is the second
attempted buyer; last month the
DOJ blocked a proposed
acquisition by TransDigm Group.
plans to acquire has acquired has acquired
Pump & Engine Control Systems
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
27
First Quarter 2013
Announced Closed Closed
March 19, 2013 March 20, 2013 March 21, 2013
Notes Notes Notes
Erickson Air-Crane announced its
definitive agreement to acquire
Evergreen Helicopters, Inc. (EHI)
from Evergreen International
Aviation in a transaction valued at
up to $276.3 million. EHI provides
cargo- and personnel-related air
transport services to government
and commercial customers.
Erickson will pay $185 million in
cash and the balance in
promissory notes, preferred stock
and earn outs.
Resilience Capital Partners
acquired Aerospace Products
International, Inc. (API) from First
Aviation Services, a First Equity
Group portfolio company. As a
global aviation parts and equipment
distribution and supply chain
management firm, API’s customers
include manufacturers,
maintenance providers and
operators of widely-used military,
commercial, corporate and general
aviation aircraft. Transaction terms
transaction were not disclosed.
Moog acquired Aspen Motion
Technologies, a subsidiary of
Pentair, for $34 million in cash.
Aspen designs and manufactures
high-performance permanent
magnet brushless DC motors,
integrated digital controls and
motorized impellers. Aspen also
specializes in custom motor
designs and significant product
enhancements in a variety of high-
performance industrial
applications. Aspen’s 2012
revenue was $36 million.
plans to acquire has acquired has acquired
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
28
First Quarter 2013
Closed Closed Announced
March 25, 2013 March 27, 2013 March 27, 2013
Notes Notes Notes
The Safariland Group acquired
Mustang Survival Corp. Based in
Canada, Mustang provides
lifesaving equipment for
recreational, military, law
enforcement and industrial users in
the marine and aviation
environments. The acquisition
represents the Safariland’s first
acquisition in the marine and
aviation industries. Terms of the
transaction were not disclosed.
Overall Capital Partners acquired
Honeycomb Company of America,
Inc. (HCOA). The Florida-based
company manufactures complex,
flight-critical, bonded, composite
assemblies for US military aircraft
platforms. HCOA provided the US
Air Force and various other
commercial suppliers factory-new,
spare parts for maintenance, repair,
and overhaul for more than 50
years.
True North Logistics announced its
agreement to acquire RAMTECH
Support Services, Inc. Based in
Pennsylvania, RAMTECH is a 500-
employee, woman-owned provider
of operations and maintenance and
systems engineering and technical
assistance services, primarily to
the Department of Defense and
other federal agencies. Transaction
terms were not disclosed.
plans to acquire has acquired plans to acquire
Honeycomb Company of America, Inc.
Selected First Quarter Transaction Activity
Source: Capital IQ and InfoBase as of 03/31/13
29
First Quarter 2013 About The McLean Group
Mergers & Acquisitions
The McLean Group uses its considerable experience and
expertise in the aerospace, defense and government
services industry to guide its clients through each stage of
the mergers & acquisitions (M&A) process and ultimately
identify the most probable and suitable candidates to
complete transactions under the most favorable terms.
Strategic Consulting
The McLean Group's Strategic Consulting business
provides transaction, financial and interim management
services to companies ranging from start-up entities to
publicly-held corporations across an assortment of
industries.
Capital Formation
The McLean Group arranges private equity, venture capital,
senior debt and subordinated debt to support clients’
expansions, M&A, refinancings, recapitalizations, leveraged
buyouts and other shareholder liquidity objectives.
Business Valuation & Litigation Support
As a core competency and complement to its M&A
business, The McLean Group provides business valuation
services, including intangible asset and financial security
valuations for a variety of transactions, financial reporting
and tax purposes. In addition, The McLean Group has the
experience and credentials necessary to support litigation
proceedings, including quantifying economic damages and
valuing a minority interest in a business.
McLean Securities, a wholly-owned affiliate of The McLean Group, is a registered broker/dealer with the Financial Industry Regulatory
Authority (FINRA) and a Member, Securities Investor Protection Corporation (SIPC).
Founded in 1997, The McLean Group is a national, middle market investment bank with deep expertise in a variety of industry
verticals. Headquartered in McLean, VA, The McLean Group is among the largest independent middle market investment
banks in the region. Our core advisory services include:
30
First Quarter 2013 Recent ADG Advisory Experience
31
First Quarter 2013
Joe Golden
Principal
jgolden@mcleanllc.com
Cameron Hamilton
Principal
chamilton@mcleanllc.com
Mitch Martin
Principal
mmartin@mcleanllc.com
Greg Boucher
Managing Director
gboucher@mcleanllc.com
Kathleen Crow
Managing Director
kcrow@mcleanllc.com
Brent Lorenz
Vice President
blorenz@mcleanllc.com
John Stack
Managing Director
jstack@mcleanllc.com
Harry Ward
Director
hward@mcleanllc.com
Disclaimer: The McLean Group does not provide accounting, tax or legal advice. The contents of this document are believed to be reliable, however The
McLean Group, LLC makes no representation as to the accuracy or completeness of this information.
Aerospace, Defense and Government Services Team
The McLean Group
7900 Westpark Drive, Suite A320
McLean, VA 22102
Main: 703.827.0200
Fax: 703.827.0175
Contact Information