2 / 23
1
First Quarter 2016
Notable Quarterly M&A Activity
Capital Markets
Arlington Capital Partners announced it will acquire the Defense &
Security business of iRobot Corp. for up to $45 million
Century Link acquired netAura, LLC
Sirius Computer Solutions will acquire Force 3, Inc.
Albany International announced the acquisition of the Aerostructures
unit of Harris Corp. for $210 million
Liberty Hall Capital Partners acquired Bromford Industries Ltd.
Platinum Equity Holdings acquired PAE from Lindsay Goldberg for
an undisclosed amount
Tetra Tech, Inc. acquired INDUS Corp.
Industry News Quarterly Summary
The Department of Justice announced that it has officially dropped its pending lawsuit against Apple regarding an FBI request to provide a method
to unlock its encryption software related to the San Bernardino shooting case. Techniques to gain access to the encrypted information were
provided by a third party, but have not been disclosed. Questions regarding the security of information shared between companies remains an
issue of significant focus in the industry.
M&A activity in Q1 2016 was dominated by consolidation among large, prime contractors. Most notably, on January 26, Lockheed Martin and
Leidos announced that Lockheed will spin-off its Information Services & Global Solutions (IS & GS) business which will merge with Leidos Holdings
through a Reverse Morris Trust structure. The transaction has a total estimated value of approximately $5 billion. The deal will make Leidos the
largest government services firm in the sector, with combined revenue in excess of $10 billion.
The House Budget Committee initially rejected a proposed amendment to provide approximately $3 billion for a revolving federal IT modernization
fund. However, the White House officially filed a legislative proposal to establish the fund shortly thereafter and is proceeding with its proposal.
KKR announced that it will acquire the Defense Electronics unit of Airbus Group SE for reported consideration of approximately $1.2 billion.
The Department of Veterans Affairs announced winners of a new contract for medical disability examinations with a total value of $6.8 billion dollars.
The commencement of the contract is expected to be delayed into Q2 due to several pending protests. Additionally, the VA made 21 awards as part
of the $22.3 billion T4NG contract.
The Defense Information Systems Agency (“DISA”) granted approval to IBM to become the first cloud vendor to operate a level 5 data center for the
U.S. Navy’s Allegany Ballistics Lab.
Quarterly Industry Snapshot
Source: Public Filings; Capital IQ as of 03/31/16
% Change
Mar-16 Q1 2016 TTM
Defense Prime Index
1.4%
(2.2%)
1.1%
Defense Systems Index
2.0%
(2.6%)
(2.3%)
Diversified Government Services Index
12.4% 1.7% 5.4%
Middle Market Government Services Index
8.7% 8.5%
(13.2%)
Large Cap Aerospace Index
5.1%
(3.1%) (13.1%)
Mid Cap Aerospace Index
3.5%
(4.6%) (22.5%)
Small Cap Aerospace Index
11.2%
(1.0%) (16.1%)
International Aerospace Index
4.5% 5.8%
(3.8%)
S&P 500
4.1% 2.3% 0.0%