What We’re Reading
In this July edition of our Aerospace, Defense & Government Services industry update, we review recent articles and developments impacting our target end markets. We also provide perspective on recent trends within the public markets as well as the M&A markets.
Opinion: How a Move to Create More Competition Backfired
“Much has been written lately about aviation and space history, including the 50th anniversary of the first flights of the Concorde and Boeing 747 and Airbus’ founding. And more is coming, with the anniversaries of the Apollo 11 Moon landing in July and Embraer’s founding in August.
Another historical milestone is worth looking at as well: July 13, 2008.”
Regulators Eye Possible Standards for Supersonic Flight
“A little more than 15 years after the Concorde took its final flight, the industry is beginning to see progress both within the U.S. FAA and the broader international spectrum on efforts to pave the way for the return of supersonic flight. But it may be at least a half-dozen years before any significant regulatory changes are in place.”
Opinion: What The UTC-Raytheon Deal Says About Aerospace’s Future
“The mighty consolidation wave that swept over the aerospace and defense industry after then-Deputy U.S. Defense Secretary William Perry’s ‘Last Supper’ in 1993 is taking another turn. The next inflection in the restructuring story is the proposed merger of United Technologies Corp. (UTC) and Raytheon to form what would be the third-largest global aerospace company by revenue, Raytheon Technologies. It is a stunning deal, marking a sharp change in our outlook on the markets and establishing a bellwether of new corporate-development plot lines to motivate the next chapter in the saga.”
Private Equity's Growing Role in the Federal Market
“Every now and then someone says something that at first sounds like a joke and at least a little sarcastic. But then then as you listen, you realize they weren’t being flippant. They were actually making a keen observation…Senior Staff Writer Ross Wilkers was moderating a panel that included Karen Trowbridge, former CEO and current chairman of Trowbridge & Trowbridge; and John Hynes, CEO of Applied Insight. Both companies are backed by private equity groups and represent a trend we are seeing of increased activity by them to build middle-tier platforms.”
Perspective on Public Marketsa,b,1
Stock Price Performance – Last Twelve Months
Most Significant Stock Price Movement – May 31st to June 30th
Stock price rose after sales and earnings out performance in Q3 FY19 and an upward earnings revision for Q4
Outperformance driven by strong recent quarterly sales as well as tailwinds in its global military business
Recent announcement of strategic partnership with Air France Industries KLM Engineering & Maintenance
Recent M&A Transactions2
Indicates disclosed enterprise values in millions USD, unless denoted with “B” (billion)
a. Current stock prices in USD as of 6/30/19
b. Aircraft OEMs: BA, BBD.B, EADS, ERJ
Aerospace Supply Chain & Aftermarket Support: AIR, ARNC, ATRO, B, BBA, DCO, HEI, HRX, HXL, KAMN, MAL, MGGT, MOG.A, ROLL,
SAF, SNR, SPR, TDG, TGI, WAIR, WWD
Diversified Industrial: AME, CR, CW, ETN, GE, HON, PH, RR, TXT, UTX
Defense Prime Contractors: BA, BAE, EADS, GD, HO, HII, LMT, NOC, RTN
Defense Technologies: AVAV, CHG, CMTL, COB, CUB, ESLT, FLIR, HRS, KTOS, LLL, MRCY, TDY, ULE
Government Services: BAH, CACI, LDOS, MANT, SAIC, VEC
Diversified Services: ACM, BAB, FLR, GIB, ICFI, JEC, KBR, SRP
The information and views contained in this report were prepared by Harris Williams LLC (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities or financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The securities and financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.
Harris Williams LLC is a registered broker-dealer and member of FINRA and SIPC. Harris Williams & Co. Ltd is a private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams & Co. Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. Corporate Finance Advisors GmbH is registered in the commercial register of the local court of Frankfurt am Main, Germany, under HRB 107540. The registered address is Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany (email address: email@example.com). Geschäftsführer/Directors: Jeffery H. Perkins, Paul Poggi. (VAT No. awaited). Harris Williams is a trade name under which Harris Williams LLC, Harris Williams & Co. Ltd and Harris Williams & Co. Corporate Finance Advisors GmbH conduct business.