aerospace, defense and government services mergers and acquisitions update

7/30/2019 Aerospace, Defense and Government Services Mergers and Acquisitions Update

1/18

Aerospace, Defense and Government ServicesWeekly Industry Update

The Week Ending Friday, August 2, 2013


2/18

1


Notable M&A Activity Capital Markets

Michael Baker Corporation announced that it entered

into a definitive merger agreement to be acquired byIntegrated Mission Solutions, an affiliate of DCCapital Partners.

Smartronix acquired the Telemetry and DataSystems Business Unit of Wyle.

Accenture Federal Services agreed to acquire ASMResearch.

% Change

1 Week 4 Weeks YTDDefense Prime Index 2.7% 12.4% 29.9%

Government Services Index 4.1% 11.1% 29.6%

Defense Systems Index 3.6% 13.7% 27.1%

Middle Market D&G Services Index (0.9%) 3.0% 32.7%

Large Cap Aerospace Index 1.0% 7.6% 31.5%

Mid Cap Aerospace Index (0.5%) 8.4% 34.5%

Small Cap Aerospace Index (0.0%) 7.1% 39.5%

S&P 500 (0.3%) 4.3% 18.2%

Industry News

EADS is rebranding itself under the Airbus moniker. The Company will be renamed Airbus Group as major changes in itscorporate structure are announced.

Raytheons Joint Land Attack Cruise Missile Defense Elevated Netted Sensor (JLENS) will be deployed about 10,000 feetabove Washington, DC sometime in the next year to defend against cruise missiles and other unmanned and mannedthreats.

The Federal Aviation Administration approved two small UAVs for commercial use.

Defense Secretary Chuck Hagel said that the US would have to reduce the size of its armed forces or its investment innew technology if budget cuts were not lifted.

The Senate confirmed James Comey as FBI Chief in a 93-1 vote.

The DoD will purchase 71 more F-35 fighter jets from Lockheed Martin. The deal, worth more than $7.0 billion, is lesscostly than a similar deal that was signed last year: 36 of the aircraft will be purchased for 4% less than last year while theother 35 will be purchased for 8% less.

Weekly Industry Snapshot

Source: Public Filings; Capital IQ as of 08/01/13


3/18

2

The Week Ending Friday, August 2, 2013Industry News

Source: Public Filings; Industry Newswires and Capital IQ as of 08/01/13

EADS is rebranding itself under the Airbusmoniker. Its board of directors approved CEOTom Enders proposal to change the

Companys name to Airbus Group.

Meanwhile, the Companys corporate structure is undergoing

major changes as well. Defense and Space units Cassidianand Astrium will be merged and renamed Airbus Defenseand Space, while Eurocopter will be renamed AirbusHelicopters. These changes reflect a dramatic strategicchange as the Company no longer aims to balance itscommercial and defense/space segments. Airbus Groups

civil aircraft business will generate nearly twice as much

revenue as all other Airbus Group segments combined.

The Federal Aviation Administration (FAA)approved two small UAVs for commercialuse. The UAVs first flights will take place off

the coast of Alaska later this summer. BothUAVs, which are manufactured by

AeroVironment and Boeing subsidiary Insitu, are designed

for aerial surveillance. The FAA revealed that a major energycompany will fly them in international waters, though it didnot identify the company or specify the purpose for which theaircraft will be used. The Insitu UAV is expected to supportemergency response crews for oil spill monitoring andwildlife surveillance.

Raytheons Joint Land Attack Cruise

Missile Defense Elevated NettedSensor (JLENS) will be deployed

about 10,000 feet above Washington, DC sometime in the

next year. The JLENS aerostat system, which cost morethan $2 billion to develop, reportedly provides more warningtime than conventional surveillance aircraft. JLENS will allowthe Army to see for 320 miles in any direction from 10,000feet above the ground. The aerostat is expected to be able tostay in the air for 30 days without refueling and is capable ofdetecting cruise missiles and other unmanned and mannedthreats using the Patriot and Standard Missile 6 defenses.

Defense Secretary Chuck Hagel delivered aspeech detailing how the US would have toreduce its global security measures if budgetcuts were not lifted. He said that the USwould have to cut the size of its armed forces

or its research into new technology. If technology were

prioritized, Hagel estimated that the active-duty Army wouldshrink between 21% and 33% from its peak, while the MarineCorps would downsize by about 10%. The option cited byHagel would be to cancel or limit weapons programs, slowthe development of cyber warfare tools, and reduce thenumber of Special Operations forces.


4/18

3

The Week Ending Friday, August 2, 2013Quarterly Earnings Announcements

CompanyFor the Quarter

Ending

Consensus Estimates Actual % Difference from Estimate

Revenue EPS Revenue EPS Revenue EPS

6/30/2013 $1,410.7 $0.37 $1,427.0 $0.48 1.2% 29.7%

6/28/2013 $1,312.0 $0.87 $1,359.6 $0.51 3.6% -41.4%

6/29/2013 $657.2 $0.82 $670.6 $0.90 2.0% 9.8%

6/30/2013 $633.8 $0.56 $605.1 $0.58 -4.5% 3.6%

6/30/2013 $603.5 $0.67 $617.7 $0.70 2.4% 4.5%

6/30/2013 $226.5 $0.31 $230.2 $0.28 1.6% -9.7%

6/30/2013 $80.1 -$0.04 $78.3 -$0.06 -2.3% -50.0%

6/30/2013 $78.6 $0.09 $83.0 $0.14 5.5% 55.6%

6/30/2013 $72.2 $0.12 $72.1 $0.11 -0.2% -8.3%

6/29/2013 $75.2 $0.44 $70.8 $0.34 -5.8% -22.7%



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The Week Ending Friday, August 2, 2013Announced M&A Transactions

Source: Capital IQ and InfoBase as of 08/01/13

Announced Closed

July 29, 2013 July 29, 2013

Notes Notes

Integrated Mission Solutions (IMS), aportfolio company of DC Capital Partners,will acquire Michael Baker for $40.50 pershare. Baker, which provides engineering,design, planning, and construction servicesto the defense industry, will expand IMSs

offering of mission critical services. Theper share offer price represents a 55%premium to Bakers 90-day average shareprice.

Smartronix acquired Wyles Telemetry andData Systems business unit, a provider ofaerospace engineering and IT services tothe government. The acquisition will helpSmartronix break into the expandingaerospace industry, a major goal of thecompanys diversification strategy.

Telemetry and Data Systems facilities willbe integrated with the Smartronix ProductsEngineering business unit.

will acquire has acquired

Telemetry and Data Systems


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5

The Week Ending Friday, August 2, 2013Announced M&A Transactions

Source: Capital IQ and InfoBase as of 08/01/13

Closed Announced

July 30, 2013 July 31, 2013

Notes Notes

National Response Corporation, a portfoliocompany of JF Lehman & Company,acquired OP-TECH EnvironmentalServices, a provider of specialtyenvironmental remediation and industrialservices in the Northeast and Mid-Atlantic.The acquisition will complement NRCs

existing West Coast customer base andexpand its environmental emergencyresponse services.

Accenture will acquire ASM Research, aprovider of advanced information solutionsand services to US defense and federalhealth clients. The deal will improve

Accentures access to opportunities withthe Department of Defense andDepartment of Veterans Affairs, particularlyin the military health industry. ASM alsohas extensive experience in datawarehousing, data analytics, and softwaredevelopment.

has acquired will acquire


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AVAV PCP BEAV UTX COL BA TXT BBD.B HXL ESL MOG.A TGI CW ORB AIR SPR AVAV DGI HEI WAIR GY ATRO GILT LMIA

13.7x 12.3x12.7x 10.8x 9.6x 9.1x 8.4x 8.1x 11.4x 8.9x 8.3x 7.0x7.8x7.9x 6.6x 6.4x 46.7x 14.3x 12.7x 8.6x10.1x11.5x 7.3x12.3x

LLL RTN LMT GD NOC SAI BAH CACI MANT CSC FLIR TDY CUB HRS XLS KEYW KTOS ICFI DRCO NCIT

8.1x 7.8x 7.5x 7.2x 6.6x 7.9x 7.8x 6.9x 6.4x 4.0x 10.4x11.8x 9.1x 7.8x 5.5x 14.9x 8.7x 8.0x 4.7x6.0x

Public Market Valuations: EV/2013E EBITDA Multiples

Defense and Government Services

Defense Prime Index Government Services Index Defense Systems Index Middle Market Index

Aerospace

Large Cap Aerospace Index Mid Cap Aerospace Index Small Cap Aerospace Index

Average: 7.9xMedian: 7.8x

Average: 11.3xMedian: 9.3x


Average: 7.4x Average: 6.6x Average: 8.9x Average: 8.5x

Average: 10.6x Average: 8.0x Average: 15.4x


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38.7%

52.8%

35.6%

41.2%

25.1%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Aug 2012 Aug 2012 Sep 2012 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013 Apr 2013 May 2013 Jun 2013 Jul 2013 Aug 2013

Defense Prime Index Government Services Index

Middle Market Defense & Government Services Index Defense Systems Index

S&P 500 Index

DefenseSystems Index 97% 99% 100% 100% 100%

Defense PrimeIndex 100% 99% 100% 100% 100%

Capital Markets: Overview (Defense and Gov. Services)

Last 52 Weeks Custom Index Performance

GovernmentServices Index 94% 100% 97% 97% 100%

Middle MarketIndex 83% 99% 76% 98% 62% 90%

Index Constituents and Stock Price as a % of 52 Week High



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45.8%

40.6%

60.6%

25.1%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%


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 CapAerospace

Index 100% 99% 97% 96% 83% 100% 91% 99%

Mid CapAerospace

Index 94% 100% 99% 98% 98% 96% 96% 93%

Small CapAerospace

Index 92% 91% 97% 98% 85% 100% 80% 99%

Index Constituents and Stock Price as a % of 52 Week High



10/189


(6.1%)

(0.0%)

3.9%

5.7%

5.9%

6.6%

8.0%

8.6%

8.7%

9.3%

9.5%

9.9%

10.8%

11.2%

12.3%

12.5%

13.2%

14.0%

14.1%

17.1%

18.6%

19.5%

(10%) 0% 10% 20% 30%

KEYW

VSE

ICF

S&P 500

Cubic

Teledyne

CSC

Dynamics Research

Exelis

L-3

Kratos

CACI

General Dynamics

ManTech

Northrop

SAIC

Raytheon

Lockheed

NCI

Harris

Booz

FLIR

Last 4 Weeks

(14.7%)

6.2%

8.1%

20.4%

21.4%

22.4%

25.0%

30.2%

32.4%

35.6%

35.9%

36.1%

36.4%

38.1%

40.0%

41.8%

41.9%

44.2%

57.4%

61.0%

102.4%

103.9%

(40%) (20%) 0% 20% 40% 60% 80% 100% 120%

NCI

Cubic

Dynamics Research

Booz

KEYW

CACI

S&P 500

Kratos

Teledyne

Harris

Raytheon

SAIC

L-3

Lockheed

General Dynamics

ICF

Northrop

ManTech

Exelis

FLIR

VSE

CSC

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



11/1810


(5.4%)

(3.6%)

(2.4%)

(0.5%)0.5%

2.8%

3.7%

4.0%

4.6%

5.3%

5.6%

5.7%

5.9%7.0%

8.9%

9.8%

11.5%

12.0%

13.1%

13.1%

13.4%

14.9%

15.2%

17.2%

18.8%

(10%) (5%) 0% 5% 10% 15% 20% 25%

Gilat

Astronics

Precision Castparts

TriumphLMI Aerospace

GenCorp

Boeing

Orbital Sciences

Hexcel

Bombardier

Moog

S&P 500

DigitalGlobeWesco Aircraft Holdings

AAR

Ametek

Textron

HEICO

Esterline

UTC

B/E Aerospace

AeroVironmentRockwell Collins

Curtis-Wright

Spirit AeroSystems

Last 4 Weeks

2.9%

4.8%

11.3%

13.5%25.0%

27.1%

30.9%

41.4%

44.0%

45.7%

46.3%

47.7%

48.2%49.5%

54.4%

54.4%

56.9%

57.8%

59.5%

66.2%

74.4%

86.6%

91.0%

117.8%

123.4%

0% 30% 60% 90% 120% 150%

AeroVironment

LMI Aerospace

Spirit AeroSystems

TextronS&P 500

Astronics

Triumph

Bombardier

UTC

Precision Castparts

Orbital Sciences

Rockwell Collins

BoeingCurtis-Wright

Esterline

Moog

Ametek

Hexcel

Wesco Aircraft Holdings

HEICO

DigitalGlobe

AARB/E Aerospace

GenCorp

Gilat

Last 52 Weeks

Capital Markets: Stock Performance (Aerospace)

Large Cap Aerospace Mid Cap Aerospace Small Cap Aerospace Index



12/1811

The Week Ending Friday, August 2, 2013Capital Markets: Market Movers (Aerospace, Defense and Gov. Services)

Top 3 Overperformers

Company Market Close One Week Change Recent News

$20.85 10.4%Booz Allen Hamilton announced quarterly earnings thatexceeded analyst expectations for both revenue and EPS by1.2% and 29.7%, respectively.

$4.93 10.2%

NCI announced second quarter 2013 revenue exceeding themidpoint of management's guidance range issued last quarterand diluted earnings per share (EPS) exceeding the high end ofguidance by $0.02.

$6.04 9.2%

Dynamics Research announced Q2 earnings and updated itsQ3 earnings guidance. The company provided EPS guidance of$0.12-0.14 for Q3, compared to the Thomson Reutersconsensus EPS estimate of $0.12.

Top 3 Underperformers

Company Market Close One Week Change Recent News

$12.53 -7.0%KEYW announced quarterly earnings that fell short of analystexpectations for both revenue and EPS by 2.3% and 50.0%,

respectively.

$39.16 -6.7%Astronics missed Wall Streets expectations on revenue and EPSby 5.8% and 22.7%, respectively.

$79.15 -6.0%Triumph Group declared mixed results for its f iscal Q1, as theCompanys revenue dropped short of consensus outlooks.



13/1812


2.4%

2.0%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%


Defense and Government Services Aerospace

Short Interest (Aerospace, Defense and Gov. Services)

Last 52 Week Median Short Interest

Defense and Government Services

1.3% 4.6% 2.3% 3.5% 1.4% 2.1% 20.1% 2.9%

9.8% 9.6% 0.2% 2.6% 14.6% 7.4% 0.1% 1.6%

2.4% 0.8% 3.4% 2.0% 1.2%

Aerospace

0.4% 2.8% 1.1% 0.0% 1.0% 4.9% 2.1% 0.9%

2.6% 1.6% 1.4% 1.9% 2.1% 2.5% 1.3% 1.1%

9.6% 1.8% 30.8% 4.6% 0.0% 3.8% 4.9% 2.1%

Short Interest as of August 1, 2013



14/1813


Defense Systems Index

3x LTM EBITDA $425.6 $2,043.0 $1,131.9 $3,378.9 $1,043.1

Less LT Debt 102.9 649.0 394.8 1,735.1 628.1

Plus Cash 212.5 259.0 492.4 321.0 70.1

Dry Powder $535.2 $1,653.0 $1,229.6 $1,964.8 $485.1

Middle Market Defense & Government Services Index

3x LTM EBITDA $83.7 $267.2 $76.0 $313.2 $54.8 $212.3

Less LT Debt 88.9 75.0 90.1 647.2 10.0 145.2

Plus Cash 0.7 5.5 2.8 51.6 1.0 0.3

Dry Powder ($4.5) $197.6 ($11.3) ($282.4) $45.8 $67.4

Defense Prime Index

3x LTM EBITDA $11,067.0 $4,725.0 $16,041.0 $10,851.0 $10,083.0

Less LT Debt 3,907.0 3,630.0 6,140.0 5,933.0 4,732.0Plus Cash 3,757.0 328.0 2,845.0 4,904.0 2,467.0

Dry Powder $10,917.0 $1,423.0 $12,746.0 $9,822.0 $7,818.0

Government Services Index

3x LTM EBITDA $1,644.0 $1,005.4 $5,998.5 $561.7 $2,616.0

Less LT Debt 1,704.0 687.8 2,732.0 200.0 1,298.0

Plus Cash 385.4 56.3 2,054.0 193.6 563.0

Dry Powder $325.4 $373.9 $5,320.5 $555.3 $1,881.0

Dry Powder Calculations (Defense and Gov. Services)

($ millions)



15/1814


Mid Cap Aerospace Index

3x LTM EBITDA $559.5 $925.3 $1,038.6 $903.6 $1,057.8 $477.9 $466.2 $2,040.4

Less LT Debt 708.6 948.0 779.4 314.0 784.8 147.0 1,176.7 1,413.8

Plus Cash 75.3 143.0 169.2 56.7 161.7 210.7 313.1 18.5

Dry Powder ($73.8) $120.3 $428.3 $646.3 $434.8 $541.6 ($397.4) $645.1

Small Cap Aerospace Index

3x LTM EBITDA $44.2 $126.6 $197.7 $655.2 $95.2 $597.3 $132.7 $579.9

Less LT Debt 0.0 25.5 707.4 1,146.4 47.6 228.5 279.0 580.0

Plus Cash 75.3 16.5 134.6 273.7 71.5 16.9 0.8 61.0

Dry Powder $119.5 $117.7 ($375.1) ($217.5) $119.1 $385.7 ($145.5) $60.9

Dry Powder Calculations (Aerospace)

Large Cap Aerospace Index

3x LTM EBITDA $2,609.0 $2,074.2 $23,949.0 $3,309.0 $7,570.9 $3,201.0 $3,825.0 $31,899.0

Less LT Debt 1,323.7 1,959.8 9,578.0 7,257.0 3,807.2 1,165.0 3,615.0 21,656.0

Plus Cash 177.3 572.4 8,694.0 0.0 0.0 354.0 459.0 4,909.0

Dry Powder $1,462.6 $686.8 $23,065.0 ($3,948.0) $3,763.7 $2,390.0 $669.0 $15,152.0

($ millions)



16/1815

The Week Ending Friday, August 2, 2013About The McLean Group

Mergers & Acquisitions

The McLean Group uses its considerable experience andexpertise in the aerospace, defense and governmentservices industry to guide its clients through each stage ofthe mergers & acquisitions (M&A) process and ultimatelyidentify the most probable and suitable candidates tocomplete transactions under the most favorable terms.

Strategic Consulting

The McLean Group's Strategic Consulting businessprovides transaction, financial and interim managementservices to companies ranging from start-up entities to

publicly-held corporations across an assortment ofindustries.

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&Abusiness, The McLean Group provides business valuationservices, including intangible asset and financial securityvaluations for a variety of transactions, financial reportingand tax purposes. In addition, The McLean Group has theexperience and credentials necessary to support litigationproceedings, including quantifying economic damages andvaluing a minority interest in a business.

McLean Securi t ies, a whol ly-ow ned aff i l iate of The McLean Grou p, is a registered bro ker/dealer with the Financial Industry Regu latory

Auth ori ty (FINRA) and a Member, Securi t ies Investor Protect io n Corp orat ion (SIPC).

Founded in 1997, The McLean Group is a national, middle market investment bank with deep expertise in a variety of industryverticals. Headquartered in McLean, VA, The McLean Group is among the largest independent middle market investmentbanks in the region. Our core advisory services include:


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16

The Week Ending Friday, August 2, 2013Recent ADG Advisory Experience


18/18

17


Joe GoldenPrincipal

[email protected]

Cameron [email protected]

Mitch [email protected]

Greg BoucherManaging [email protected]

Kathleen CrowManaging [email protected]

Brent LorenzVice [email protected]

Gregory NossamanManaging [email protected]

John StackManaging Director

[email protected]

Harry [email protected]

Greg WoodfordSenior Managing [email protected]

Disclaimer:The McLean Group does not provide accounting, tax or legal advice. The contents of this document are believed to be reliable, however TheMcLean Group, LLC makes no representation as to the accuracy or completeness of this information.

Aerospace, Defense and Government Services Team

The McLean Group7900 Westpark Drive, Suite A320McLean, VA 22102Main: 703.827.0200Fax: 703.827.0175

Contact Information

aerospace, defense and government services mergers and acquisitions update

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