1
2013 Year in Review
Notable 2013 M&A Activity
Capital Markets
Textron acquired Beechcraft
CACI acquired Six3 Systems
Rockwell Collins acquired ARINC
Michael Baker Corporation was acquired by Integrated
Mission Solutions, an affiliate of DC Capital Partners
TransDigm acquired Arkwin Industries
Engility acquired Dynamics Research Corporation
% Change
First Half
2013
Second Half
2013
CY2013
Defense Prime Index
24.1% 33.3% 65.5%
Defense Systems Index
13.3% 28.5% 45.6%
Diversified Government Services Index
20.7% 15.2% 39.1%
Middle Market Government Services Index
23.4% 15.1% 42.0%
Large Cap Aerospace Index
20.7% 25.7% 51.7%
Mid Cap Aerospace Index
21.0% 34.6% 62.9%
Small Cap Aerospace Index
32.6% 20.8% 60.2%
International Aerospace Index
26.4% 29.5% 63.6%
S&P 500
12.6% 15.1% 29.6%
Executive Summary
Source: Public Filings; Capital IQ as of 12/31/13
The global macroeconomic uncertainties that highlighted the end of 2012 continued to permeate into 2013 beginning with the
implementation of sequestration and culminating in a 16 day government shutdown in October. Since reopening however,
Congress passed a two year budget plan and signs of an economic recovery continue. Despite all of these disruptions to the
federal government and broader economy, the S&P 500 closed the year up 29.6% and was significantly outperformed by all of our
custom Aerospace, Defense and Government Services indices.
Amidst this climate of budget uncertainty, defense and government services transaction volume fell sharply. In 2013, The McLean
Group tracked 129 announced defense and government services transactions compared to 219 in 2012. The drop in acquisitions
was most notable among large government services primes. Acquisition activity in 2013 by constituents of The McLean Group’s
defense prime index was down 63% compared to the trailing three year average volume. Instead of pursuing acquisitions, many
companies divested non-core business units to reshape and reposition in response to shrinking government spending. However,
this reduced activity by large strategic buyers created an attractive environment for private equity to pursue opportunities in the
sector and enabled mid-tier service providers to gain scale through inorganic growth.
Aerospace transactions, meanwhile, remained stable in 2013. The McLean Group tracked 123 announced transactions compared
to 129 in 2012. Major Original Equipment Manufacturer (OEM) suppliers were especially active, helping to drive deal volume and
value. Furthermore, both strategic and financial buyers continued to be motivated by strong global air traffic growth forecasts.
