What We’re Reading
In this April 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.
The MRO M&A Market Is Like a Game of Poker
“In many ways, MRO mergers and acquisitions constitute their own form of industry-predictive maintenance and how it affects the health of the sector. An intelligent deal involves gathering data and looking at what might happen, not only for MRO providers but for aviation as a whole. In the words of former Apple CEO John Sculley: ‘The best way to predict the future is to invent it.’”
Why OEMs Keep Joining the Race for MROs: Dassault Acquires ExecuJet
“Dassault’s acquisition of Luxaviation subsidiary, ExecuJet — on Monday this week — comes as the most recent in a trail of business maneuvers being made by aircraft manufacturers today. Typically, OEMs (original equipment manufacturers) have delivered aircraft. And despite always having a close relationship with MRO (maintenance, repair and overhaul) companies — either through authorized service center agreements or equity investments — acquiring maintenance facilities has never looked more lucrative.”
Six Defense Budget Issues to Watch
“When U.S. President Donald Trump submitted his defense budget request to Congress, the reaction was lukewarm at best. Democrats dismissed it as “dead on arrival,” and it even had Republicans scratching their heads. The request for $750 billion to fund the Pentagon sets up a series of battles—some of which fall along partisan or parochial lines, others pitting lawmakers against the executive branch.”
The Navy Wants to Shrink Its Aircraft Carrier Fleet
“Visiting the USS Gerald R. Ford two years ago, U.S. President Donald Trump extolled the importance of an enlarged naval force featuring a dozen aircraft carriers—including the Ford, the most expensive ship ever built. Having 12 of these behemoths—sometimes accompanied by a half-dozen other ships—would send an international signal of U.S. resolve and restore the fleet to its post-Cold War size during the 1990s. The Pentagon's latest budget proposal, however, seems to do the opposite.”
Perspective on Public Marketsa,b,1
Recent M&A Transactions2
Indicates disclosed enterprise values in millions USD, unless denoted with “B” (billion)
a. Current stock prices in USD as of 3/31/19
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, KEYW, LDOS, MANT, SAIC, VEC
Diversified Services: ACM, BAB, FLR, GIB, ICFI, JEC, KBR, SRP
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