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  • M&A INTERNATIONAL INC.

    Aerospace & Defense Report

    2014 in Review

    www.mergers.net

  • 2M&A International Inc. - we close deals in your industry

    Table of Contents

    1. Introduction ........................................................................................................................................................................................... 3

    2. Aerospace & Defense Industry Trends ................................................................................................................................................ 4

    Top Commercial Primes ................................................................................................................................................................... 6

    Commercial and Military MRO ......................................................................................................................................................... 9

    Global Defense Spending ............................................................................................................................................................. 11

    3. Aerospace & Defense M&A Activity ................................................................................................................................................... 13

    Consolidation ............................................................................................................................................................................... 13

    Select Acquisitions by Leading A&D Industry Players .................................................................................................................. 14

    European Joint Ventures .............................................................................................................................................................. 16

    Private Equity ............................................................................................................................................................................... 17

    Global M&A .................................................................................................................................................................................. 18

    Global M&A by Segment ............................................................................................................................................................... 20

    Defense M&A ............................................................................................................................................................................... 23

    Recent Notable Defense M&A Deals ............................................................................................................................................ 23

    4. Highlighted Transactions ................................................................................................................................................................... 24

    Precision Castparts Corp. Acquires Aerospace Dynamics ............................................................................................................. 24

    Alliant Techsystems Inc. Merges with Orbital Sciences Corp. ........................................................................................................ 25

    CobhamplcAcquiresAeroflexHoldingCorp. ................................................................................................................................ 27

    Engility to Acquire TASC from KKR and General Atlantic ............................................................................................................. 29

    5. Highlighted Platforms ........................................................................................................................................................................ 31

    Bombardier CSeries ..................................................................................................................................................................... 31

    TerminalHighAltitudeAreaDefense(THAAD). ............................................................................................................................. 33

    NorthropGrummanGlobalHawk .................................................................................................................................................. 35

    Airbus A320neo ............................................................................................................................................................................ 37

    6. About M&A International Inc. .............................................................................................................................................................. 39

    7. Recent Transactions Closed by M&A International Inc.s Specialists .............................................................................................. 40

    8. Main M&A International Inc. Aerospace & Defense Specialists ........................................................................................................ 42

  • 3M&A International Inc. - we close deals in your industry

    1IntroductionAEROSPACE & DEFENSE REPORTIntroduction

    The aerospace and defense industry is undergoing major structural change, driven by increased globalization, rapid consolida-tion and continued pricing pressures. While commercial aerospace orders, deliver-ies and backlog remain at historic highs,defense budgets are under considerable downward pressure. While the commercial aerospace sector is seeing the introduc-tion of new platforms and programs (787-10, 777X, 757 replacement, etc.), certaindefense platforms and programs face the

    risk of either cancellation or curtailment(C-17,A-10,F-16,U-2,etc.).Thesetrends,discussed in thefirstsectionof this report,will provide a basis for the analysis in the second and third sections regarding the resurgence in M&A deal activity and rising valuations. This report also includes brief, regional aerospace & defense updates from ourlocalexperts.

    Excellent Time to Sell

    As 2014 has come to a close, we wanted to share some high level thoughts on dealvaluationsandkeytrendswithintheAerospace&Defense(A&D)industry.

    Businesses continue to trade at exceptionally high valuations. A combination of high stock prices, lowinterest rates, lite covenants, pent-up demand for deals, excess cash oncorporate balance sheets, private equity overhang, improving fundamentals, amongst other factors, has contributed to a valuation environment that is very strong. Competition among buyers to acquire certain key strategicbusinesses has at times been intense. Notwithstanding near-term bullish forecasts, the A&D industry is undergoing major structural change. It is our belief that business owners shouldnotoverlooktheimpactofthesestructural changes on the future survival and prosperity of their businesses. A careful assessment of ones financialand strategic objectives is as timely today as it has ever been.

    Bottom line: From a valuationperspective, there has rarely been a better time for an A&D business owner to sell than the present. Our A&D Group brings extensive industry expertise,buyerknowledgeandanunderstandingof specialized issues facing A&D business owners and companies.

    Stephen PerryHead of M&A International Inc.sAerospace & Defense Group

  • 4M&A International Inc. - we close deals in your industry

    Aerospace & Defense Industry TrendsAEROSPACE & DEFENSE REPORT 2

    Figure 1: Cumulative Deliveries Value (US$b)

    Commercial aircraft original equipment manufacturers (OEMs) are expected toamassover36,000deliveriesinthenext20years, including the development of new ver-sions and upgrades, such as Boeings 777X and Airbus A320neo. Over 25,000 of these deliveries, valued cumulatively at US$2.6trillion, consist of single-aisle aircraft. Me-diumwide-body (US$1.2 trillion)andsmall

    wide-body (US$1.1 trillion) aircraft rank adistant second and third, respectively, for deliveries over the next 20 years. Newerandupgradedaircraftareexpectedtooper-ate at increased range, reduced noise, in-creased engine power and lower operating cost.Emergingmarkets, suchasAsiaandthe Middle East, are expected to receiveover 50% of projected deliveries through

    2033. Airbus A320neo and Boeings 737 MAX are expected to rank as the two topcommercial aircraft for cumulative delivery value between 2014 and 2023. LockheedMartinsF-35isforecastedtobeinthetopfive for cumulative delivery value between2014and2023,withfighteraircraftdemandprimarily driven by the need to replace ag-ingF-18andF-16aircraftfleets.

    Airbus A320neo

    Boeing 737 MAX

    Boeing 787

    Airbus A350XWB

    Lockheed F-35

    Boeing 777

    Airbus A330

    Bombardier Global

    Boeing 777-X

    Airbus A380

    Embraer E-Jets

    Gulfstream 650

    Airbus A400M

    Sikorsky H-60

    Boeing 747

    Boeing 767/KC-46

    Gulfstream 550

    Lockheed C-130J

    Gulfstream 450/P42

    Boeing AH-64

    2014-2023 255 220 151 110 95 90 53 51 47 45 43 28 27 25 24 23 23 22 21 19

    2004-2013 175 145 20 0 8 115 90 25 0 25 34 3 1 26 25 15 25 14 13 20

    Airbus A320neo

    Boeing 737 MAX

    Boeing 787

    Airbus A350XWB

    Lockheed F-35

    Boeing 777

    Airbus A330

    Bombardier Global

    Boeing 777X

    Airbus A380

    Embraer E-Jets

    Gulfstream 650

    Airbus A400M

    Sikorsky H-60

    Boeing 747

    Boeing 767/KC-46

    Gulfstream 550

    Lockheed C-130J

    Gulfstream 450/P42

    Boeing AH-64

    $0 $30 $60 $90 $120 $150 $180 $210 $240 $270

    2014-2023 2004-2013

    Source: Teal Group Corporation; data as of 2014

  • 5M&A International Inc. - we close deals in your industry

    Aerospace & Defense Industry TrendsAEROSPACE & DEFENSE REPORT 2

    Figure 2: Commercial Aircraft 2014-2033 Forecast by Region

    Figure 3: Commercial Aircraft Deliveries 2014-2033

    Source: Boeing

    Source: Boeing

    37 20 20 8 8 4 3 3 3 2 2 2 2 2 2 12

    3%4%

    8%

    8%

    20%

    20%

    37%

    Asia-Pacific

    Europe

    North America

    Latin America

    Middle East

    C.I.S.

    Africa

    36,770Total

    Deliveries

    Regional Jets: 6%

    Single-Aisle: 70%

    Small Wide-Body: 13%

    Medium Wide-Body: 9%

    Large Wide-Body: 2%

    Average Deal Value

    2,490 25,680 4,520 3,460 620

    Regional Jets: 6% Single-Aisle: 70% Small Wide-Body: 13% Medium Wide-Body: 9% Large Wide-Body: 2%

    6203,4604,520

    25,680

    2,490

    Regional Jets 6%

    Regional Jets: 2%

    Single-Aisle: 47%

    Small Wide-Body: 23%

    Medium Wide-Body: 23%

    Large Wide-Body: 6%

    Average Deal Value

    100 2.560 1.140 1.160 240

    Regional Jets: 2% Single-Aisle: 47% Small Wide-Body: 23% Medium Wide-Body: 23% Large Wide-Body: 6%

    Regional Jets 6%

    US$100b

    US$2,560b

    US$1,140b US$1,160b

    US$240b

    39 20 17 6 12 3 3

    3%3%

    12%

    6%

    17%

    20%

    39%

    Asia-Pacific

    Europe

    North America

    Latin America

    Middle East

    C.I.S.

    Africa

    US$5.2tTotal Value

    # Aircraft

    Dollar Value

  • 6M&A International Inc. - we close deals in your industry

    Aerospace & Defense Industry TrendsAEROSPACE & DEFENSE REPORT 2

    Program Backlog

    737NG 1,636

    737 MAX 2,663

    767 47

    787 843

    777 564

    747 36

    Total 5,789

    Source:Boeing,Airbus,MarketResearch

    Top Commercial Primes

    Demand for commercial aircraft remains extremely strong. In some cases, orderbacklogs extend out 6-8 years at currentproduction rates. Boeing and Airbus accu-mulated record industry backlogs in 2014.The huge backlog reflects robust demandfor upgraded single-aisle aircraft, Airbus A320neo and Boeings 737 MAX.

    Program Backlog

    A320ceo 1,508

    A320neo 3,621

    A330 313

    A350 779

    A380 165

    Total 6,386

    RecordTotalBacklog

    12,175Airbus/Boeing Combined

    Platform H2

    2011 H1

    2012 H2

    2012 H1

    2013 H2

    2013 H1

    2014 H2

    2014 Forecast

    737 31.5 35 35 38 38 42 42Plans to increase the monthly production rate to 47 beginning in 2017

    747 1.5 1.5 2 2 2 1.5 1.5Plans to further reduce the monthly production rate to 1.5 fromFeb2014throughtheendof2015

    767 2 2 2 2 1 1.5 1.5Expectstoincreasethemonthlyproductionrateto2in2016

    777 7 7 7 8.3 8.3 8.3 8.3 First777Xdeliveryexpectedin2020

    787 2.5 3.5 5 7 7 10 10Plans to increase the monthly production rate to 12 in 2016 and 14 by 2020

    Source:Boeing,MarketResearch

    Boeing recently announced plans to ramp up production of the 737 aircraft from 42 per month to 47 per month beginning in 2017, claiming globaldemandsupportsmoreofthesefuel-efficientplanes.Thereductionin747outputfrom2permonthto1.5permonthreflectsaslowerrecoveryinthecargomarketthanthecompanyanticipated.Monthlybuildratesofthe767modelroseslightlyhigherfrom1permonthto1.5 per month in order to respond to increased demand. 777 aircraft production increased from 7 per month to 8.3 per month as the 777X nears its debut. In spite of early problems, Boeings 787 Dreamliner production has risen steadily from 7 per month to 10 per month and is expectedtocontinuegrowing.

    Figure 4: Boeing Monthly Build Rate

  • 7M&A International Inc. - we close deals in your industry

    Aerospace & Defense Industry TrendsAEROSPACE & DEFENSE REPORT 2

    Platform H2

    2011 H1

    2012 H2

    2012 H1

    2013 H2

    2013 H1

    2014 H2

    2014 Forecast

    A320 38 40 40 42 42 42 42Monthlybuildrateof44expectedbyQ12016followedbyanother increase to 46 in the following quarter

    A330 8.5 9 9.5 10 10 10 10Plans to maintain the current monthly production rate of 10 at least through 2015

    A350 N/A N/A N/A N/A N/A N/A N/ACurrentlyinearlyproduction(firstdeliveryforlaunchcustomerQatarAirwaysexpectedH22014);planstoreach a monthly build rate of 10 by 2018

    A380 2 2 2 2 2 2 2.7Stabilizedandrefinedproductionprocessin2013;plansto deliver 30 A380s in 2014, approaching a build rate of 3

    Source:Airbus,MarketResearch

    TheA320neoleadsthechargefortheAirbusfleet,anditsproductionincreasefrom40permonthto42permonthcarriesintonextyearandbeyond.ThecompanyplanstomaintainthecurrentrecordlevelsofA330outputof10permonthoverthenext6yearstoaccommodateanexpectedflatmarket.AirbusexpectsitsA350modeltoreachmonthlybuildratesof10by2018,butitcurrentlyremainsintheearlyproduc-tionstage.FortheA380,thecompanyplanstokeepproductionratesflatinthelightofrecentmonthsofrelaxeddemand.

    Figure 5: Airbus Monthly Build Rate

    Figure 6: Aircraft Demand Drivers

    $0

    $20

    $40

    $60

    $80

    $100

    $120

    $14014%

    12%

    10%

    8%

    6%

    4%

    2%

    0%

    1986

    1987

    1988

    1989

    1990

    1991

    1992

    1993

    1994

    1995

    1996

    1997

    1998

    1999

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    3-M

    onth

    LIB

    OR

    3-Month London Interbank Offered Rate (LIBOR), based on US$

    Dol

    lar p

    er B

    arre

    l

    Cushing, OK WTI Spot Price FOB (Dollars per Barrel)

    Oil Prices

    Interest Rates

    Source: www.eia.gov

  • 8M&A International Inc. - we close deals in your industry

    Aerospace & Defense Industry TrendsAEROSPACE & DEFENSE REPORT 2

    The recent decline in oil prices jeopardizes the longest boom cycle for commercial air-craftmakersinthejetage.Theupswinginjetorders, which began before, and was largely unaffected by the 2008 financial crisis, hasbeen driven in large part by two factors: falling interest rates and climbing oil prices. Abundant and inexpensive capital providedairlineswithanarrayoffinancingoptionsto

    modernizetheirfleets.Furthermore,highsus-tained oil prices have precipitated demand for more fuel-efficient aircraft. The unprec-edented demand has led to the monumental current combined backlog of over 12,000unfilled orders for Boeing and Airbus, val-uedatapproximatelyUS$2 trillion.Backlogorders are, however, susceptible to delays/deferralswith oil becoming less expensive.

    Cheaper fuel reduces demand for more fuel-efficientaircraft.Thoughlowerfuelbillsmaylessen the operating cost advantages of new planes, the duration of the current global sup-ply and demand imbalance for oil remains to be seen and themore fuel-efficient aircraftarelikelytoleadtohugecostadvantagesinthe long-term.

    2012 20222009 150 2752010 525 5502011 800 1.4002012 1.200 8002013 1.300 1.5002014 1.425 1.400

    200

    400

    600

    800

    1,000

    1,200

    1,400

    1,600

    2009 2010 2011 2012 2013 2014

    AirbusBoeing

    Figure 7: Net New Orders of Aircraft Figure 8: Average Industry Fuel Costs

    Source: Airbus, Boeing

    YearAverage Price per Barrel of Crude (US$)

    % of Operating

    Cost

    2003 28.8 14%

    2004 38.3 17%

    2005 54.5 22%

    2006 65.1 26%

    2007 73.0 27%

    2008 99.0 33%

    2009 62.0 26%

    2010 79.4 26%

    2011 111.2 28%

    2012 111.8 30%

    2013 108.8 30%

    2014 101.4 29%

    2015F 85.0 26%

    Source: IATA Economics

  • 9M&A International Inc. - we close deals in your industry

    Aerospace & Defense Industry TrendsAEROSPACE & DEFENSE REPORT 2

    US$1b

    Figure 9: Commercial MRO

    Source:Moog,ICF

    Aircraftretirementagesdirectlyimpacttheaerospaceanddefenseindustry,inparticularthosecompaniesengagedinspares/aftermarketandmaintenance,repairandoverhaul(MRO).Currenttrendsdemonstrateaircraftfleetsareincreasinglyreachingthematurestageintheirlifecycle,whichwillleadtorisingspares/aftermarketandMROspending.

    Commercial and Military MRO

  • 10M&A International Inc. - we close deals in your industry

    Aerospace & Defense Industry TrendsAEROSPACE & DEFENSE REPORT 2

    5348

    2865611000060523806948615855491848639077

    0% 20% 40% 60% 80% 100%

    77%

    90%

    63%

    48%

    18%

    49%

    55%

    58%

    61%

    48%

    69%

    38%

    52%

    60%

    100%

    61%

    65%

    28%

    48%

    53%

    N/A

    N/A

    N/A

    Current % of Retirement Age

    Source:UnitedStatesAirForce

    Aircraft Type Number of AircraftCurrent

    Average AgeAge at

    Retirement

    A-10 347 31 59

    B-1 66 25 52

    B-2 20 18 64

    B-52 76 51 79

    C/KC-135 417 51 84

    C-130E 46 49 49

    C-130H 268 26 N/A

    C-130J 68 7 N/A

    C-5A/C 59 41 68

    C-5B/M 50 28 54

    C-17 206 10 26

    E-3 23 32 N/A

    F-15A/C/D 250 29 42

    F-15E 222 21 44

    F-16C/D 1,023 22 36

    F-16Blk30/32 317 25 43

    F-16Blk40/42 395 22 40

    F-16Blk50/52 245 18 37

    F-22 166 6 34

    KC-10 59 28 58

    EC-130H 14 39 62

    AC-130H 8 43 48

    T-38 494 46 60

    Figure 10: Military MRO (Age of Aircraft Fleet)

  • 11M&A International Inc. - we close deals in your industry

    Aerospace & Defense Industry TrendsAEROSPACE & DEFENSE REPORT 2

    Figure 11: Global Defense Spending

    Figure 12: Defense Spending

    Source: SIPRI

    Source: SIPRI, * SIPRI estimate

    Developedcountries,suchas theUS,France,UK,GermanyandJapan,haveexhibitedonlyslight increases in theamountofnationalmilitaryexpenditurefrom2004to2013.Ontheotherhand,certaindevelopingcountries,suchasGeorgia,Ghana,Azerbaijan,Kazakhstan,AfghanistanandIraq,havesignificantlyincreasedtheirnationalmilitaryexpenditurefrom2004to2013bybetween3-6times.

    US China* Russia* SaudiArabia France UK Germany Japan IndiaSouth Korea Italy

    2013 Spending (US$b)

    $640 $188 $87.8 $67 $61.2 $57.9 $48.8 $48.6 $47.4 $33.9 $32.7

    % Change, 200413

    12% 170% 108% 118% 6.4% 2.5% 3.8% 0.2% 46% 42% 26%

    2013 Spending as a % of GDP

    3.8% 2.0% 4.1% 9.3% 2.2% 2.3% 1.4% 1.0% 2.5% 2.8% 1.6%

    Global Defense Spending

  • 12M&A International Inc. - we close deals in your industry

    Aerospace & Defense Industry TrendsAEROSPACE & DEFENSE REPORT 2The United States defense spending de-creased significantly in recent years as aresultofeffortstoreducethenationaldefi-cit and the withdrawal of forces from Iraq. Despite budget sequestration, the UnitedStates remained the global leader in military expenditure in 2014, spending over threetimes more than the next leading nation,China. The subsequent top defense spend-erswereFrance,RussiaandSaudiArabia.

    Saudi Arabia signed multiple prominent military contracts in recent years worth US$43.5 billionwith defense leaders Boe-ing, General Dynamics and Raytheon. This ultimately led to them becoming one of the topfivecountriesforglobaldefensespend-ing. Other countries that spent considerable amounts on military equipment over the past few years include Australia, Brazil, India, SouthKoreaandtheUnitedArabEmirates.

    Figure 13: Military Spending

    Rest of the World:Top 10 Foreign Military Spending

    28 13 10 9 9 7 7 7 5 5

    United States

    28 13 10 9 9 7 7 7 5 5

    5%5%

    7%

    7%

    7%

    9%9%

    10%

    13%

    28% China*

    Russia*

    Saudi Arabia

    France

    UK

    Germany

    Japan

    India

    South Korea

    Italy

    US$705bUS$640b

    US Military Spending

    Sum of select recent notable

    contracts shown

    Figure 14: Military Contracts

    Source:DefenseSecurityCorporation,MarketResearch

    Source: SIPRI, * SIPRI estimate

  • 13M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORTConsolidation

    Seeking to increase margins and marketshare, leading tier 1 companies continue to search for opportunities to merge with/acquire strategic targets. 2014 had one of the largest total disclosed values over the pastfiveyears,drivenbymergersofpubliccompanies with combined enterprise values in the billions, an effect of consolidation.

    The merger of Alliant Techsystems Inc. and Orbital Sciences Corporation was one of the largest mergers in 2014. This trans-action merged two prominent space and defense companies into one strategic, fully-integrated company with increased offerings and greater expertise. Another componentof aerospace and defense consolidation has been divestitures by public companies of less strategic divisions post transaction, such as United Technologies Corporationsdivestiture of certain Goodrich assets.

    Aerostructures

    Flight Controls

    A&D Electronics

    Environ. Control Systems

    Wheels & Brakes

    Nacelles & Reversers

    Engines

    Electrical Power & Distr.

    Interiors

    Landing Gear

    Auxiliary Power Units

    1. Prioritt 0,11 0,18 0,22 0,26 0,27 0,32 0,38 0,29 0,5 0,48 0,82. Prioritt 0,07 0,17 0,21 0,24 0,25 0,21 0,16 0,25 0,25 0,42 0,173. Prioritt 0,82 0,65 0,57 0,5 0,48 0,47 0,46 0,46 0,25 0,1 0,03

    Aerostructures

    Flight Controls

    A&D Electronics

    Environ. Control Systems

    Wheels & Brakes

    Nacelles & Reversers

    Engines

    Electrical Power & Distr.

    Interiors

    Landing Gear

    Auxiliary Power Units

    0% 20% 40% 60% 80% 100%

    3%

    10%

    25%

    46%

    46%

    47%

    48%

    50%

    57%

    65%

    82%

    17%

    42%

    25%

    25%

    16%

    21%

    25%

    24%

    21%

    17%

    7%

    80%

    48%

    50%

    29%

    38%

    32%

    27%

    26%

    22%

    18%

    11%

    Supplier 1 Supplier 2 Others

    Figure 15: Market Share

    Source:ICFSH&E

    A View From France

    TheA&DsectorhasbeenparticularlyactiveintermsofM&AactivityinFrancein2014withover30dealspubliclyannounced(dealsinvolvingatleastoneFrenchparty).Comparedto2013,thenumberofdealsisupby50%.Threemainstrategicdriverscanexplainthishighnumberoftransactions.

    Ongoing consolidation among metal & cast parts players: The steep ramp up in aircraft deliveries by Airbusentailsincreasingcapitalneedsfortheentiresupplychain.Weakerorsmallerplayersencounteringdifficulties tomaintainproductionqualityor toaccessadequatefinancial resourcesoften resolve theseissues by joining a bigger and stronger player.

    Acquisitions in the US and Canada are actively sought by Airbus suppliers. This is a way for them tofulfilladoublerequestfromAirbus:1)diversifyitscustomerbasebyacquiringsuppliersofBoeingandBombardiersprogramsand2)increaseoperatingcostsinUS$,therebyreducingexposuretothe/$rateriskasAirbusimplementsitspolicytogrowpaymentsinUS$toitsEuropeansuppliers.

    Growing attention to innovation: 2014 has seen numerous funding initiatives for innovative projects inA&D,mainlyaroundUAVprojects,3Dprintingandlightweightcabinequipment.EnginemanufacturerSafran Group has also launched Safran Corporate Venture, its own private equity fund dedicated to innovation in engine technologies.

    AllthesestrategicmovesarefacilitatedbythemucheasieraccesstofinancialresourcesprovidedbybankersandPEfunds.Afterbeingconsideredformanyyearsasanindustrythatwastooriskyortootechnical,investorsnowseemtovaluethehighbarriers-to-entry,thecomfortofhavingabacklogofseveralyearsofactivity,and the implementationofambitiousgrowthstrategiesbyskilledCEOs. In this favorablecontext,thereisagoodchancethattheM&AactivityofFrenchA&Dplayerswillremainverydynamicinthecomingmonths.

    Raphael PetitAerospace & Defense SpecialistM&A International Inc.France

  • 14M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORTSelect Acquisitions by Leading A&D Industry Players

    ThetablesbelowdetailmergersandacquisitionsvaluedinexcessofUS$500millionmadebykeyaerospaceanddefensecompaniesinthe last 20 years.

    Target Year Value (US$b)

    RockwellDefense 1996 $3.2

    McDonnell Douglas 1997 29.2

    HughesSpace&Communications 2000 3.8

    Jeppesen Sanderson 2000 1.5

    Aviall 2006 2.1

    Vought Operations in S. Carolina 2009 1.0

    Argon ST 2010 0.8

    Target Year Value (US$b)

    Gulfstream Aerospace 1999 $5.5

    GTE Government Systems Corp. 1999 1.1

    PrimexTechnologies 2001 0.5

    Motorola Integ Info Sys Group 2001 0.8

    GM Defense 2003 1.1

    Veridian Corporation 2003 1.6

    Anteon International Corp. 2006 2.2

    Jet Aviation Management 2008 2.2

    AxsysTechnologies 2009 0.6

    Vangent 2011 1.4

    Target Year Value (US$b)

    E-Systems 1995 $2.3

    Chrysler Technologies 1996 0.5

    TexasInstrumentsDefense 1997 3.0

    Hughes Electronics Defense 1997 9.5

    Target Year Value (US$b)

    AlliedSignal 1999 $16.7

    Pittway Corp. 2000 2.2

    UniversalOilProducts 2005 0.8

    Novar 2005 2.5

    FirstTechnology 2006 0.7

    Metrologic Instruments 2008 0.7

    Sperian Protection 2010 1.4

    EMS Technologies 2011 0.6

    Intermec 2013 0.7

    Target Year Value (US$b)

    Grumman Corp. 1994 $2.2

    Westinghouse Military & Elec Sys 1996 3.6

    Logicon . Inc. 1997 1.4

    Litton Industries Avondale Industries

    20011999

    5.00.5

    Newport News Shipbuilding 2001 2.5

    TRW . Inc. BDM InternationalLucasVarity

    200219971999

    14.3 1.18.0

    EssexCorp. 2007 0.6

    Target Year Value (US$b)

    General Dynamics Military Aircraft 1992 $1.5

    Martin Marietta Corp. GE Aerospace

    19941992

    13.0 2.7

    Loral Corp. IBM Federal Systems

    19961993

    7 .61.6

    COMSAT General Corp. 2000 2.6

    ACSFederal 2003 0.7

    *=includesacquisitionsunderUS$500m

    Bold = mergerItalics = acquisition by company prior to being acquired/merged itself

  • 15M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORT

    Target Year Value (US$b)

    Sundstrand Corp. 1999 $4.2

    Chubb Security 2000 2.0

    Kidde Limited 2005 4.2

    RocketdynePropulsion&Power 2005 0.7

    Initial Electronic Security Group 2006 1.2

    GE Security 2008 1.8

    Goodrich Corp. Freedom Chemical CompanyColtec IndustriesTRW Aeronautical Systems

    2010199819982002

    18.60.62.01.5

    Target Year Value (US$b)

    10LockheedMartinDivisions 1997 N/A

    Raytheon Aircraft Integration Sys 2002 $1.1

    VertexAerospace 2003 0.7

    Titan Corp. 2005 2.7

    Insight Technology 2010 0.6

    Target Year Value (US$b)

    Cessna Aircraft 1992 $0.6

    UnitedIndustrialCorp. 2007 1.0

    Beechcraft Corp. 2014 1.4

    Target* Year Value (US$b)

    MAG Aerospace Industries, Inc. 1998 $0.2

    Intertechnique SAS 1999 0.4

    C&D Zodiac, Inc. 2005 0.6

    Polaris Pool Systems, Inc. (nka:ZodiacPoolCare,Inc.)

    2005 0.3

    SellGmbH 2010 0.3

    +20sub-$100Morundisclosedacquisitionssince2002

    Target Year Value (US$b)

    SextantAvionique 1999 N/A

    Racal Electronics 2000 2.2

    DCNInt'l(minoritystake) 2007 1.0

    Alcatel Critical Systems 2007 1.2

    Target Year Value (US$b)

    Marconi Selenia Communications S.p.A.(nka:SelexESS.p.A)

    2002 $0,6

    AgustaWestland 2004 1,9

    SELEX Galileo 2007 0,5

    DRS Technologies 2008 5,1

    Target Year Value (US$b)

    Snecma Sopartech (Labinal)

    20052000

    7.6 1.1

    Sagem 2005 N/A

    SduIdentification 2008 0.6

    GEHomelandProtection 2009 0.6

    L-1 Identity Solutions 2011 1.6

    Target Year Value (US$b)

    Arospatiale Matra Hautes Technologies

    20001999

    N/AN/A

    DaimlerChrysler Aerospace Siemens Defense Electronics

    20001998

    N/AN/A

    Construcciones Aeronuticas 2000 N/A

    Airbus S.A.S. 2006 3.5

    Vector Aerospace Corp. 2011 0.7

    Satair 2011 0.5

    Target Year Value (US$b)

    Siemens Plessey Electronics 1998 $0.5

    GE, Marconi Electronics Systems Tracor

    19991998

    12.7 1.3

    LockheedMartinAerospaceElect. 2000 1.7

    LockheedMartinControlSystems 2000 0.5

    Alvis 2004 0.5

    DigitalnetHoldings 2004 0.6

    UnitedDefenseIndustries 2005 4.5

    ArmorHoldings 2007 4.2

    TenixDefence 2008 0.7

    Detica Group 2008 1.1

    *=includesacquisitionsunderUS$500m

    Bold = mergerItalics = acquisition by company prior to being acquired/merged itself

  • 16M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORTEuropean Joint Ventures

    Joint ventures offer strategic advantages for all parties involved in the formation of the entity. European aerospace and defense companies that utilize joint ventures have combined as-sets in order to gain greater scale and strate-gically position themselves as global industry leaders. Recently, Airbus and Safran received approval from the European Union antitrustregulators to form a joint venture to consoli-date the satellite, space launcher and missile propulsion segments of both companies and create a large, specialized company that will serve the European community. The CEO of Airbus,FabriceBrgierstated,Withthisjointventure, industry has made a strong state-ment and has assumed leadership to foster Europes autonomous access to space.

    Figure 16: European Joint Ventures

    Source: Company reports

    A View From the UK

    25%

    37.5%

    37.5%21%

    33%

    46%50% 50%

    ATR-600 SeriesATR 72-500 SeriesATR 42-500 Series

    Join

    t Ve

    ntur

    eS

    elec

    ted

    Pla

    tform

    sP

    erce

    ntO

    wne

    rshi

    pS

    hare

    -ho

    lder

    s

    Typhoon(EF-2000) Tranche 1 Tranche 2 Tranche 3A

    ASRAAMDiamondBack

    Dual Mode BrimstoneLaser Guided Zuni

    MeteorViper-E

    TheUKaerospacemarketisthesecondlargestglobally,aftertheUS,withmorethan3,000companies. TheUKdefenseindustryisacornerstoneoftheBritisheconomywithanindustryturnoverofmorethan 22billionayear.BelowarekeydriversoftheM&AtrendsintheUKA&Dindustry:

    Civil aerospace - supply chain consolidation: In recent years we have witnessed an increase in mergers and acquisitions between companies operating in the same supply chain, rather than between directly competing businesses. With growing demand for higher commercial aircraft production rates, businesses arelookingtoincreasecapital,enhancehumanresourcecapabilitiesandexpandproductionfacilities,andmanyseeverticalintegrationasonewayofdoingthis.Lastyear,wesawUltraElectronicsHoldingsplcacquire ICE Corporation Inc., a specialist provider of aerospace electrical power management systems, in ordertoextenditscapabilitiesintheaerospacesector.Withgrowingpressureoncompaniestoincreaseproduction, bolstering capabilities through supply chain consolidation is increasingly favorable; however, thereisconcernoverhowthisstrategymaydampeninnovationascompanieslooktosellratherthaninvest.

    Defense - reduced military spending: In the defense sector there are some more fundamental issues to overcome in terms of future defense spending and how M&A opportunities can be harnessed to help companies improve their current position. With reduced defense and military spending budgets now in place in Western economies, a number of defense companies are coming under increasing pressure to explorenewopportunities.DiversifyingintonewcommercialaviationmarketsisonestrategyandlastyearwesawCobhamacquireAeroflex,aproducerofcomponentsandsystemsforwirelesscommunications,andBAESystemsacquireSilverSky,anexpertproviderofcloudsecuritysolutions.

    Similarly,companiesarealsolookingatotheremergingeconomiesthathavegrowingdefensebudgets,suchasIndiaandBrazil,astheyofferopportunities.Withpoliticalandregulatoryfactorscreatingacomplexindustry environment, M&A is not always a viable option and as a result joint ventures are growing in popularity.Oneexample is in India,whereonly13 Indiancompaniesare fully licensed tobidon IndiangovernmentdefensecontractsandseveraloftheseareactivelylookingforUKpartnerstoboostcapacityandcapabilitiestotakeontheselargecontracts.

    Philip BarkerAerospace & Defense SpecialistM&A International Inc.United Kingdom

  • 17M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORT

    Private Equity Group

    Select Transactions

    Company Sub-Sector Acq.

    MB Aerospace Aero-Engine Components 2013

    QuantumSpatial Software/ Govt Services 2013

    Iron Data Software/ Govt Services 2011

    Compusearch Software/ Govt Services 2010

    Novetta Solutions Cybersecurity/ Govt Services 2010

    LandmarkAviation FBO/MRO 2012

    Booz Allen Hamilton

    Management Consulting/ Govt Services

    2008

    Sequa Corporation Aerospace MRO and Metal Coating 2007

    Wesco Aircraft Aerospace Distribution 2006

    Aeronautical & GI Holdings

    Aircraft and Naval Systems/ Sensors 2014

    IMECO Ship MRO 2013

    National Response Corporation

    DiversifiedRegulatory/EmergencyServices

    2012

    Doss Aviation Military Aviation Training & Simulation 2011

    BeyondTrust Software

    Software/ Govt Services 2014

    EMCORE, Space Photovoltaics Business

    Space 2014

    Anaren Microwave/RFComponentsandSubsystems

    2013

    CPI International Microwave/RF/PowerandControlSystems

    2011

    Private Equity

    PrivateEquityacquisitionsandexitsaccount-ed for 26% and 10%, respectively, of all trans-actionsin2014.Oftheacquisitionsexecutedby private equity firms, 60% were add-onacquisitions for current portfolio companies. The most acquisitive firms of 2014 wereTrive Capital, Arlington Capital Partners and J.F. Lehman&Companywith five, four andthree transactions, respectively. A popular private equity strategy in 2012 and 2013 was to acquire strategic add-ons for current plat-forms,whereasnumerousPEfirms realizedinvestments in 2010 and 2011. This probably suggeststhatprivateequityfirmsarebuildingcurrent portfolios with the intention of realizing investmentsoverthenextseveralyears.

    2010 22 46 292011 21 37 242012 34 14 24

    2013 48 14 36

    2014 39 25 27

    0

    10

    20

    30

    40

    50

    60

    2010 2011 2012 2013 2014

    27

    36

    242429

    25

    1414

    37

    46

    39

    48

    34

    2122

    Add-on Exit Platform

    Figure 17: Private Equity Transactions by Type

    Source:DacisDM&A,CapIQ

    Source:CapIQ,Dacis,companywebsites

    A View From Seattle

    The consolidation of 1st Tier Boeing suppliers has continued for the ongoing reasons of scale, diversification anddesire on the part of the OEM to deal with fewer suppliers and larger components. With many private 1st Tier companies having been acquired, the consolidation has moved into the 2nd Tier. Therefore, we are continuing to see significantstrategic transaction opportunities for both 1st and 2nd Tier suppliers. We expectthistocontinuewellinto2016.

    Scott Hardman Aerospace & Defense SpecialistM&A International Inc.United States, Seattle

    Arlington Capital Partners

  • 18M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORTGlobal M&A

    Since 2010, international deals have con-sistently accounted for 40%-45% of annual transactions. After a low point in 2012, in-ternational M&A rebounded with one of its strongest years. In 2014, international M&A successfully completed 103 transactions, with approximatelyUS$20billioninenterpriseval-ue, half of the total disclosed enterprise val-ues for the entire aerospace and defense in-dustry. In general, the number of international dealsoverthepastfiveyearshascorrelatedhighly with the total number of aerospace and defense transactions overall.

    The average total enterprise value (TEV)/EBITDAmultipleover thefive-yearperiodof2010-2014 for theUK,Europe,MiddleEast/Africa, Canada and Asia-Pacific are 9.6x,9.8x,7.1x,8.9xand6.8x, respectively.Overthe same time frame, the top three targeted regions for acquisitions outside of the USwereEurope,theU.K.andCanada.

    2010 2011 2012 2013 2014Average Deal Value

    17,238 12,674 10,709 7,329 19,949No. of Deals 92 81 58 95 103

    $0

    $5

    $10

    $15

    $20

    $25

    $30

    0

    20

    40

    60

    80

    100

    120

    2010 2011 2012 2013 2014

    10395

    58

    8192

    Tota

    l Dis

    clos

    ed D

    eal V

    alue

    (U

    S$

    billi

    ons)

    Num

    ber o

    f Tra

    nsac

    tions

    Total Disclosed ValueNumber of Transactions

    45 30 9 9 6 1

    1%6%

    9%

    9%

    30%

    45%Europe

    UK

    Canada

    Asia-Pacific

    Mid East / Africa

    Other Americas

    Figure 18: International Transactions (2010-2014)

    Figure 19: Acquisitions in Non U.S. Regions (2010-2014)

    Source:DacisDM&A,CapIQ

    Source:DacisDM&A,CapIQ

    A View From Germany

    TodaysmarketchallengeshavehadadirecteffectonM&Amarketactivityasentirevaluechainsarein the midst of a global restructuring. Suppliers at all tier levels have begun to realize that a presence on at least three continents is required in order to maintain a competitive position. Accordingly, there is global pressure for consolidation and collaborations, including potential equity partnerships, that will be increasingly importantgoing forward inorder to reachhigh-growth targets, to initiate/expandmarketaccessandtoacquirekeytechnologies.Especiallyagainstthebackgroundofdecliningdefensebudgets,furtherconsolidationspecificallyinthedefensesectorislongoverdue.Anycompaniesthathavenotyetapproached globalization in earnest should realize that business as usual is not an option.

    A growing requirement to offer increasingly innovative products, such as multi-level products and servicesandnewtechnologies,requiresinvestmentsinR&D,HR,trainingandproduction.Forexample,stricter regulations and government requirements cause continuous pressure to innovate regarding fuelefficiencyandenvironmentalprotection.Tooffsetthesecosts,agrowingnumberofcompaniesaremoving towards flexible platformsandmodular design to permit economies of scale and transferringproduction activities to low-wage countries.

    Michael Thiele Aerospace & Defense SpecialistM&A International Inc.Germany

  • 19M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORTFollowing three years of declining deal vol-ume(273dealsin2010,206in2011and176in 2012),A&D transactionactivity pickedupin 2013 and 2014 with 215 and 256 deals, respectively(Figure20).

    PublicmarketvaluationsforA&Dcompaniesare at their highest levels since before the 2008financialcrisis(Figure21).

    Source:DacisDM&A,CapIQ

    Source:DacisDM&A,CapIQ

    Others Electricity T&D total09-4Q 31 24 55

    10-1Q 45 33 78

    10-2Q 40 17 57

    10-3Q 37 28 65

    10-4Q 46 27 73

    11-1Q 30 21 51

    11-2Q 35 23 58

    11-3Q 25 11 36

    11-4Q 32 29 61

    12-1Q 14 22 36

    12-2Q 24 19 43

    12-3Q 16 18 34

    12-4Q 24 39 63

    13-1Q 17 32 49

    13-2Q 15 38 53

    13-3Q 16 32 48

    13-4Q 30 37 67

    14-1Q 29 30 59

    14-2Q 24 50 74

    14-3Q 10 41 51

    14-4Q 18 54 72

    0

    20

    40

    60

    80

    100

    09-4

    Q

    10-1

    Q

    10-2

    Q

    10-3

    Q

    10-4

    Q

    11-1

    Q

    11-2

    Q

    11-3

    Q

    11-4

    Q

    12-1

    Q

    12-2

    Q

    12-3

    Q

    12-4

    Q

    13-1

    Q

    13-2

    Q

    13-3

    Q

    13-4

    Q

    14-1

    Q

    14-2

    Q

    14-3

    Q

    14-4

    Q

    72

    51

    74

    5967

    4853

    49

    63

    3443

    36

    61

    36

    5851

    7365

    57

    78

    55

    54

    41

    5030

    37

    323832

    39

    1819

    22

    29

    11

    2321

    272817

    33

    24

    1810

    242930161517

    2416

    2414

    32253530

    463740

    4531

    Disclosed Undisclosed

    Others total09-4Q 3 6,610-1Q 8 8,6

    10-2Q 11 9,0

    10-3Q 12 11,5

    10-4Q 13 10,9

    11-1Q 10 10,0

    11-2Q 11 9,3

    11-3Q 8 10,2

    11-4Q 7 9,3

    12-1Q 6 9,4

    12-2Q 7 9,1

    12-3Q 5 7,3

    12-4Q 7 8,7

    13-1Q 3 7,5

    13-2Q 4 9,0

    13-3Q 5 12,1

    13-4Q 9 13,8

    14-1Q 8 10,1

    14-2Q 4 13,8

    14-3Q 3 7,5

    14-4Q 6 9,3

    0,0x

    4,0x

    8,0x

    12,0x

    16,0x

    09-4

    Q

    10-1

    Q

    10-2

    Q

    10-3

    Q

    10-4

    Q

    11-1

    Q

    11-2

    Q

    11-3

    Q

    11-4

    Q

    12-1

    Q

    12-2

    Q

    12-3

    Q

    12-4

    Q

    13-1

    Q

    13-2

    Q

    13-3

    Q

    13-4

    Q

    14-1

    Q

    14-2

    Q

    14-3

    Q

    14-4

    Q

    9,3x

    7,5x13,8x

    10,1x13,8x

    12,1x9,0x

    7,5x

    8,7x

    7,3x

    9,1x9,4x

    9,3x10,2x

    9,3x10,0x

    10,9x11,5x

    9,0x

    8,6x

    6,6x6

    34

    89

    543

    75

    7678

    1110131211

    8

    3

    EBITDA Multiple Number of Deals with Reported TEV/EBITDA Multiples

    C

    M

    Y

    CM

    MY

    CY

    CMY

    K

    chart_15.pdf 1 17/02/15 17:52

    Figure 20: Number of A&D Transactions

    Figure 21: EBITDA Multiples based on Publicly Traded Companies

    N

  • 20M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORTGlobal M&A by Segment

    After the low point in 2012 of 176 transactions andUS$20.1billion indisclosedA&Denter-prise values, 2014 amassed over US$41.5billion in total disclosed enterprise values on 256 transactions within the aerospace and defense industry. The increase in both the number of transactions and transaction vol-ume from 2012 to 2014 represents CAGRs of 13% and 27%, respectively. In 2014, 23 transactions were closed with an enterprise

    valueofoverUS$250million.Ofthesedeals, 11hadavaluationofoverUS$1billion.

    The most active Aerospace and Defense seg-mentsbydiscloseddealvaluesin2014(Fig-ure22) include:Engines&EngineSystems(US$7 billion), Satellite, Satellite Services&SpaceSystems (US$6.6 billion) andCyber-security,IntelligenceServicesandHomelandDefense (US$5 billion). Segments with thegreatestdealactivityin2014(Figure23)wereMachined & Cast Parts (38 transactions),

    MRO&Logistics(34transactions)andGov-ernmentServices,ITServices&Software(29transactions). Controls & Systems (15.4x),Specialty Defense Systems & Services (13.4x)andAircraftInteriors(12.9x)generat-ed the highest TEV/EBITDA multiples in 2014. The top strategic acquirers in 2014 consisted ofamixof both commercial aerospaceanddefense primes, with Triumph Group leading the way with four transactions, followed by LockheedMartin,ZodiacAerospaceandBAESystems, with three transactions each.

    Engines & Engine Systems 7.025Satellite, Satellite Services & Space Systems

    6.611Cybersecurity, Intelligence Services & Homeland Defense 5.082

    Machined & Cast Parts 3.983MRO & Logistics 3.946Defense Electronics 3.849Sensors & C4ISR 2.326Test & Measurement 1.700Specialty Defense Systems and Services 1.683

    Electronics Manufacturing (EMS) & Harnessing 930

    Aircraft Interiors 914Components & Subsystems 794Connectors 581Controls & Systems 419Government Services, IT Services and Software 385

    Composites 292Land Systems 80Navy/Maritime 51Engineering and Project Management 25

    Aerostructures 23Simulation & Training Systems 13Distribution Unmanned Vehicles Prime Defense Contractors

    Engines & Engine Systems

    Satellite, Satellite Services & Space Systems

    Cybersecurity, Intelligence Services & Homeland Defense

    Machined & Cast Parts

    MRO & Logistics

    Defense Electronics

    Sensors & C4ISR

    Test & Measurement

    Specialty Defense Systems and Services

    Electronics Manufacturing (EMS) & Harnessing

    Aircraft Interiors

    Components & Subsystems

    Connectors

    Controls & Systems

    Government Services, IT Services and Software

    Composites

    Land Systems

    Navy/Maritime

    Engineering and Project Management

    Aerostructures

    Simulation & Training Systems

    Distribution

    Unmanned Vehicles

    Prime Defense Contractors

    $0 $2,500 $5,000 $7,500 $10,000

    $13

    $23

    $25

    $51

    $80

    $292

    $385

    $419

    $581

    $794

    $914

    $930

    $1,683

    $1,700

    $2,326

    $3,849

    $3,946

    $3,983

    $5,082

    $6,611

    $7,025

    Total Disclosed Value(US$m)

    Figure 22: Value of Disclosed Deals by Segment (2014)

    Source:DacisDM&A,CapIQ

  • 21M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORT

    A View from Cleveland

    We have seen the fortunes of a number of midwest manufacturing companies improve in the A&D sector. These companies include providers of products as diverse as jet and turboprop engines and components, aluminum structural aircraft components, aircraft braking systems, landing gear assemblies andcomponents,tanksandothermilitaryvehicles,heatexchangersformilitaryaircraftandvehicles,steelforarmor plating, etc. Thus, although Midwest A&D manufacturers do not generally manufacture products as exoticasanewF-35fighter,theyarebenefitingfromtheengineeringanddesignofmanylessglamorousitemsandthegutsofthemoreexoticones.

    Mark A. FilippellAerospace & Defense Specialist M&A International Inc. United States, Cleveland

    Machined & Cast Parts 38MRO & Logistics 34Government Services, IT Services and Software 29

    Components & Subsystems 24Sensors & C4ISR 17Defense Electronics 16Specialty Defense Systems and Services 14

    Controls & Systems 10Test & Measurement 8Simulation & Training Systems 8Engines & Engine Systems 7Cybersecurity, Intelligence Services and Homeland Defense 6

    Composites 6Satellite, Satellite Services & Space Systems 6

    Aircraft Interiors 6Land Systems 5Unmanned Vehicles 5Engineering and Project Management 4

    Aerostructures 4Navy/Maritime 4Electronics Manufacturing (EMS) & Harnessing 2

    Connectors 2Distribution 1Prime Defense Contractors -

    Machined & Cast Parts

    MRO & Logistics

    Government Services, IT Services and Software

    Components & Subsystems

    Sensors & C4ISR

    Defense Electronics

    Specialty Defense Systems and Services

    Controls & Systems

    Test & Measurement

    Simulation & Training Systems

    Engines & Engine Systems

    Cybersecurity, Intelligence Services and Homeland Defense

    Composites

    Satellite, Satellite Services & Space Systems

    Aircraft Interiors

    Land Systems

    Unmanned Vehicles

    Engineering and Project Management

    Aerostructures

    Navy/Maritime

    Electronics Manufacturing (EMS) & Harnessing

    Connectors

    Distribution

    Prime Defense Contractors

    0 10 20 30 40

    1

    2

    2

    4

    4

    4

    5

    5

    6

    6

    6

    6

    7

    8

    8

    10

    14

    16

    17

    24

    29

    34

    38

    Number of Deals

    Figure 23: Volume of Deals by Segment (2014)

    Source:DacisDM&A,CapIQ

  • 22M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORT

    14-4Q 9.3 9.3 614-3Q 7.5 7.5 314-2Q 13.8 13.8 414-1Q 10.1 10.1 813-4Q 13.8 13.8 913-3Q 12.1 12.1 513-2Q 9.0 9.0 413-1Q 7.5 7.5 312-4Q 8.7 8.7 712-3Q 7.3 7.3 512-2Q 9.1 9.1 712-1Q 9.4 9.4 611-4Q 9.3 9.3 711-3Q 10.2 10.2 811-2Q 9.3 9.3 1111-1Q 10.0 10.0 1010-4Q 10.9 10.9 1310-3Q 11.5 11.5 1210-2Q 9.0 9.0 1110-1Q 8.6 8.6 809-4Q 6.6 6.6 314-4Q 9.3 9.3 6

    14-4Q

    14-3Q

    14-2Q

    14-1Q

    13-4Q

    13-3Q

    13-2Q

    13-1Q

    12-4Q

    12-3Q

    12-2Q

    12-1Q

    11-4Q

    11-3Q

    11-2Q

    11-1Q

    10-4Q

    10-3Q

    10-2Q

    10-1Q

    09-4Q

    0x 4x 8x 12x 16x

    6.6x

    8.6x

    9.0x

    11.5x

    10.9x

    10.0x

    9.3x

    10.2x

    9.3x

    9.4x

    9.1x

    7.3x

    8.7x

    7.5x

    9.0x

    12.1x

    13.8x

    10.1x

    13.8x

    7.5x

    9.3x

    7

    9

    9

    12

    11

    10

    9

    10

    9

    9

    9

    7

    9

    8

    9

    12

    14

    10

    14

    8

    9

    Number of Deals with Reported TEV/EBITDA Multiples

    6

    3

    4

    8

    9

    5

    4

    3

    7

    5

    7

    6

    7

    8

    11

    10

    13

    12

    11

    8

    3

    6

    TEV/EBITDA

    6

    3

    4

    8

    9

    5

    4

    3

    7

    5

    7

    6

    7

    8

    11

    10

    13

    12

    11

    8

    3

    6

    Aerostructures 8.6 8.6 4Aircraft Interiors 12.9 12.9 2Components & Subsystems 8.7 8.7 3Composites 10.0 10.0 1Connectors 0.0 0.0Controls & Systems 15.4 15.4 2Cybersecurity. Intelligence Services and Homeland Defense 10.2 10.2 5

    Defense Electronics 10.2 10.2 13Distribution 9.2 9.2 4Electronics Manufacturing (EMS) & Harnessing 7.2 7.2 1

    Engineering and Project Management 11.7 11.7 2

    Engines & Engine Systems 7.8 7.8 5Government Services. IT Services and Software 7.7 7.7 3

    Land Systems 0.0 0.0Machined & Cast Parts 9.8 9.8 8MRO & Logistics 11.3 11.3 5Navy/Maritime 0.0 0.0Prime Defense Contractors 0.0 0.0Satellite. Satellite Services & Space Systems 7.9 7.9 5

    Sensors & C4ISR 10.3 10.3 2Simulation & Training Systems 9.0 9.0 1Specialty Defense Systems and Services 13.4 13.4 4

    Test & Measurement 11.5 11.5 3Unmanned Vehicles 9.7 9.7 1

    Aerostructures

    Aircraft Interiors

    Components & Subsystems

    Composites

    Connectors

    Controls & Systems

    Defense Electronics

    Distribution

    Engines & Engine Systems

    Land Systems

    Machined & Cast Parts

    MRO & Logistics

    Navy/Maritime

    Prime Defense Contractors

    Sensors & C4ISR

    Simulation & Training Systems

    Test & Measurement

    Unmanned Vehicles

    0x 5x 10x 15x 20x

    9.7x

    11.5x

    13.4x

    9.0x

    10.3x

    7.9x

    11.3x

    9.8x

    7.7x

    7.8x

    11.7x

    7.2x

    9.2x

    10.2x

    10.2x

    15.4x

    10.0x

    8.7x

    12.9x

    8.6x

    10

    12

    13

    9

    10

    8

    11

    10

    8

    8

    12

    7

    9

    10

    10

    15

    10

    9

    13

    9

    Number of Deals with Reported TEV/EBITDA Multiples

    TEV/EBITDA

    4

    2

    3

    1

    2

    5

    13

    4

    1

    2

    5

    3

    8

    5

    5

    2

    1

    4

    3

    1

    Cybersecurity, Intelligence Servicesand Homeland Defense

    Electronics Manufacturing (EMS) & Harnessing

    Engineering & Project Management

    Government Services, IT Servicesand Software

    Satellite, Satellite Services and Space Systems

    Specialty Defense Systems and Services

    Figure 24: TEV/EBITDA All A&D Transaction Multiples by Quarter (Last 12+ Quarters)

    Figure 25: TEV/EBITDA All A&D Transaction Multiples by Segment (Last 12+ Quarters)

    Source:DacisDM&A,CapIQ Source:DacisDM&A,CapIQ

    N

    N

  • 23M&A International Inc. - we close deals in your industry

    3Aerospace & Defense M&A ActivityAEROSPACE & DEFENSE REPORT

    merged with

    acquired

    Defense M&A

    Defense M&A activity continues to be adverse-ly impacted by the lingering effects of seques-tration. The total number of transactions de-creased from a high of 93 in 2010 to a low of 59 in 2014, representing a CAGR of -9% over the five-year span. From 2012 to 2014, defenseM&Aactivityremainedflat,withapproximately60 defense transactions per year. The defense sub-segment cyber security, IT services and software development has been able to gen-erateconsistentdealflow,withaCAGRof19%from 2012 to 2014. Due to the increased threat of compromised data and intelligence, along with theevents of theSonyhacking scandaland Edward Snowden, defense customers are ramping up security and data protection from outside threats. Defense primes are meeting the new security requirements through inter-nal research and development or by targeting smaller companies that specialize in data pro-tection as potential acquisitions.

    2010 2011 2012 2013 2014Average Deal Value

    25,4 26,1 25,1 22,5 23No. of Deals 93 73 59 63 59

    0%

    20%

    40%

    60%

    80%

    100%

    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    100

    2010 2011 2012 2013 2014

    5963

    59

    73

    93

    Def

    ense

    Dea

    ls a

    s a

    % o

    f all

    A&

    D T

    rans

    actio

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    Num

    ber o

    f Def

    ense

    M&

    A Tr

    ansa

    ctio

    ns

    Defense Deals as a % of all A&D Transactions

    Number of Defense Deals

    Figure 26: Defense Transactions 2010-2014

    Source:DacisDM&A,CapIQ

    Recent Notable Defense M&A Deals

    Defense/Government

    Hybrid A&D

    acquired

    Date Anncd 5/20/14

    TEV $1.5B

    TEV/EBITDA 11.9x

    acquired

    Date Anncd 5/20/14

    TEV $1.5B

    TEV/EBITDA 11.9x

    acquired

    acquired

    Date AnncdOct-2014

    Date AnncdJun-2014

    TEV/EBITDA7.9x

    TEV/EBITDA15.6x

    PriceUS$1.1b

    PriceUS$1.6b

    acquired

    acquired

    Date AnncdFeb-2014

    Date AnncdJun-2014

    TEV/EBITDA8.6x

    TEV/EBITDA15.6x

    PriceUS$1.5b

    PriceUS$1.6b

    acquired

    acquired

    Date AnncdMay-2014

    Date AnncdDec-2013

    TEV/EBITDA11.9x

    TEV/EBITDA0.3x

    PriceUS$1.5b

    PriceUS$1.4b

    acquired

    Date Anncd 5/20/14

    TEV $1.5B

    TEV/EBITDA 11.9x

    acquired

    Date Anncd 5/20/14

    TEV $1.5B

    TEV/EBITDA 11.9x

    Date AnncdApr-2014

    Date AnncdDec-2012

    TEV/EBITDA23.1x

    TEV/EBITDA8.5x

    PriceUS$3.3b

    PriceUS$4.3b

    acquired

    acquired

    Date AnncdOct-2014

    Date AnncdJan-2012

    TEV/EBITDA17.0x

    TEV/EBITDAn/a

    PriceUS$1.0b

    PriceUS$1.0b

  • 24M&A International Inc. - we close deals in your industry

    4Highlighted TransactionsAEROSPACE & DEFENSE REPORTPrecision Castparts Corp. Acquires Aerospace Dynamics

    Transaction Summary

    On March 20, 2014, Precision Castparts Corp. (NYSE:PCP) announced it hasagreed to acquire the assets of Aerospace DynamicsInternational,Inc.(ADI)fromTheMarvin Group for US$625 million in cash.Subject to customary closing conditions and regulatoryapprovals, thetransaction isex-pected toclose in thefirstquarteroffiscalyear2015.Theacquisitionisexpectedtobeimmediately accretive to earnings, adding anestimated$0.10-$0.15toEPSinthefirstyear, assuming no synergies1. Precision Castparts will integrate ADI into its airframe products segment.

    Aerospace Dynamics International (ADI) Overview

    ADI is a tier-one supplier for the commercial and military aerospace industries. The Com-pany manufactures machined parts and specializes in large complex components,hard metal machining and critical assem-blies. Product offerings include structural airframes (e.g., bulkheads, caps, fittings,etc.),skinsandpanels(e.g.,barrelpanels,wing skins, fuselage structural webs) andmulti-spindle machining (e.g., wing ribs,landing gear beams, spars, etc.).ADI hasstrong positions across many platforms in-cluding the Boeing 737, 777 and 787 and the F-18 and F-3. However, its main cus-tomerisAirbus,withsignificantcontractsonthe A350 platform in particular.

    The Company is California-based and em-ploysapproximately625peopleina310,000sq. ft. facility, with 50,000 sq. ft. of assembly space and 220,000 sq. ft. of manufacturing space. It operates over 45 spindles with ca-pabilities including3,4,5and6axishigh-speedverticalandhorizontalmilling,6axis

    high-speed horizontal machine centers, CNCgantryprofilersandCNCturning.ADIutilizes raw materials, such as aluminum, monolithic-graphite, high-strength steels, titanium, stainless steel, inconel and invar.

    Commentary

    ADI is an acquisition we have pursued for several years, said Precision Castparts chairman and CEO Mark Donegan. Theyhave invested in world-class facilities and developed large part capabilities that will expandouraerostructuresproductofferingand role on next-generation aircraft. ThePCC Aerostructures team, led by Andrew Masterman and Joe Snowden, will aggres-sively work with other PCC locations toprovide the fasteners, forgings and castings that ADI currently purchases on the outside, andlooktodriveadditionalopportunitiestooptimize capacity and cost decisions across our aerostructures businesses. ADI also adds another leverage point to our growing presence in Southern California.

    1 Marketresearch,estimatingADIsalesofUS$210mandEBITDAofUS$35mUS$40m

    ADI Key Figures

    Headquarters Valencia,CA,USA

    Employees 625

    Founded 1989

    Revenue1 ~US$210m

    EBITDA1 ~US$35mUS$40m

    Deal Term Summary

    Total Deal Value US$625m

    Revenue Multiple1 ~3.0x

    EBITDA Multiple1 ~15.6x17.9x

    AcquirerFinancing 100% Cash

    ADIs Management

    John Cave President and CEO

    ADIs Capabilities

    Machining, Assembly, Design Engineering, Program Management

    ADIs Select Products

    A340WingRib,F-22NozzleSeal,F-18Bulkhead,C-5LandingGear,777HingeBeam,Lay-UpMandrel

    Precision Castparts Strategic Rationale

    Significant Synergies

    Augments Exposure to High-Growth Commercial

    Platforms

    Seamless Integration

    Benefits from Aerospace Dynamics

    Precision Castparts will provide fasteners, forgings and castings to ADI, which currently sources these productsexternally,drivingcapacityoptimizationandcost reduction.

    ADIhassignificantpresenceonnext-generationaircraft, such as the Airbus A350, which will add to PrecisionCastpartscurrentdiminutiveUS$3mofshipset content on the program.

    ADIisasingle-locationoperationincloseproximityto several of Precision Castparts plants in Southern California, allowing for simple integration post acquisition.

    Deal Rationale

  • 25M&A International Inc. - we close deals in your industry

    4Highlighted TransactionsAEROSPACE & DEFENSE REPORTAlliant Techsystems Inc. Merges with Orbital Sciences Corp.

    Transaction Summary

    On April 28, 2014, the Board of Directors of AlliantTechsystemsInc.(NYSE:ATK)(ATK)approved the spinoff of ATKs Sporting Group and the immediate merger of ATKs Aerospace and Defense Groups with Orbital SciencesCorp.(NYSE:ORB)(Orbital).ATKshareholderswillown100%ofthetax-freespinoff of ATKs Sporting Group. The new aerospace and defense company formed through the merger of equals will be owned bybothATKs(53.8%)andOrbitals(46.2%)shareholders. Both parties have certain termination rights requiring the terminating party to pay a termination fee of US$10million and reimburse expenses up to

    US$10million. Pending customary closingconditions and regulatory approvals, the transaction isexpected toclosebefore theend of the calendar year.

    Orbital ATK (NYSE:OA) Overview

    The newly-formed Orbital ATK, Inc. (NYSE:OA), headquartered in Dulles, Vir-ginia, will be an industry leader, utilizing its advanced capabilities and continual innova-tion in an effort to support the ever-evolving aerospace and defense markets. Thecompany will employ 4,300 engineers and scientists, 7,400 manufacturing and operat-

    ing specialists and 1,400 management and administration personnel in facilities span-ning 17 states and amassing over 19 million square feet. The leadership of Orbital ATK will consist of nine directors from Orbital and seven directors from ATK, with other remain-ingexecutivepositionsequitablyandevenlyselected from both companies. Orbital ATK will focus on growing and strengthening its position in the launch vehicle & propulsion systems, satellite & advanced systems, missile & defense electronics, armament systems & ammunition and aero structure & components segments, representing 25%, 22%, 18%, 22% and 13%, respectively, of revenue going forward.

    Orbital ATK Key Figures

    Headquarters Dulles,VA,USA

    Employees 13

    Revenue1 ~US$4.5b

    EBITDA1 ~US$585m

    Cash2 ~US$300m

    Shares Outstanding2 ~US$60.5m

    Deal Term Summary

    Total Deal Value3 US$6,400m

    Revenue Multiple3 1.4x

    EBITDA Multiple3 11.1x

    AcquirerFinancing: 100% Cash

    Orbital ATKs Management

    RonFogleman(ATK) Board Chairman

    DaveThompson(ORB) President and CEO

    BlakeLarsen(ATK) COO

    GarrettPierce(ORB) CFO

    1 Consolidated Income Statement for 20132 ExpectedBalanceSheetatclose3 Represents combined value

    25 22 22 18 13

    13%

    18%

    22%

    22%

    25%

    Launch Vehicles & Propulsion Systems

    Satellites & Advanced Systems

    Armament System & Ammunition

    Missile System & Defense Electronics

    Aerostructures & Components

    U.S. Government

    International & Commercial

    73 27

    27%73%

    US Government

    International & Commercial

    Consolidated 2013 Revenue Consolidated 2013 Sales Breakdown

    Sales by Customer

    U.S. Government

    International & Commercial

    58 42

    42%58%

    Aerospace

    Defense

    Sales by Segment

  • 26M&A International Inc. - we close deals in your industry

    4Highlighted TransactionsAEROSPACE & DEFENSE REPORTCommentary

    David W. Thompson commented: This merger-of-equals combination of Orbital and ATK Aerospace and Defense brings to-gether two of the space and defense indus-trys most innovative developers and cost-efficient manufacturers, who have workedclosely together for over 25 years. By build-ing on complementary technologies, prod-ucts and know-how and highly-compatiblecultures, the new Orbital ATK will deliver even more affordable space, defense and aviation systems to our existing custom-ers and be strongly positioned to expandinto adjacent areas. ATK CEO Mark W.DeYoungsaid:Wearebothfocusedonen-hancing thecapabilityofexistingcustomersystems by developing solutions that can be moreflexiblydeployedtosupporttheirmis-sion with enhanced cost-effectiveness. We alsoseesignificantopportunitiesforgrowthas new programs are initiated or begin to ramp up production.

    Strategic Rationale

    Revenue Synergies

    Cost Synergies

    Organizational Integration

    Benefits from the Merger

    ThemergedcompanyexpectstogeneratebetweenUS$100m-US$200minrevenuesynergiesthroughimproved product offerings and strengthened customer relationships.

    Expectedpre-taxcostsynergiesofUS$70m-US$100mthroughverticalandsupplychainintegration,workcenterre-balancingandSG&Areductions to be fully realized by 2016.

    Similar cultural values and methodologies, along with deep relationships at all levels, should provide a seamless organizational integration.

    Deal Rationale

  • 27M&A International Inc. - we close deals in your industry

    4Highlighted TransactionsAEROSPACE & DEFENSE REPORTCobham plc Acquires Aeroflex Holding Corp.

    Transaction Summary

    On May 19, 2014, Cobham plc (Cobham)entered into a definitive agreement to ac-quireAeroflexHoldingCorp.(Aeroflex)withshareholdersreceivingUS$10.5pershareincash.CobhampaidUS$920milliontoshare-holdersandassumedAeroflexsUS$540mil-lioninliabilities.Tohelpfinancethetransac-tion,CobhamagreedtoaUS$1,300millionsenior unsecured bridge loan facility from BankofAmerica,MerrillLynchInternationalLimited and The Royal Bank of Scotland.Cobham plans to integrateAeroflex into itsexistingAdvancedElectronic Solutions andCommunications & Connectivity divisions. The combined entity will generate annual costsynergiesofapproximatelyUS$85mil-lion stemming from complementary capabili-

    ties, characteristics and customers. Cobham expects the transaction to be accretive toearnings beginning in year 2015. Cobham completed the acquisition of Aeroflex onSeptember 12, 2014.

    Aeroflex Holding Corp. Overview

    Sinceitsinceptionin1937,Aeroflexhasbeena global leader in providing radio frequency components, microwave integrated circuits, components and systems used in a variety of industries, including commercial space and avionics, commercial wireless commu-nications, medical, defense and energy. In 2013,theUSandEuropeaccountedfor75%ofAeroflexstotalrevenue.Duringthesameperiod, 70% of revenue originated from the

    higher-growth commercial segments, with no singlecustomeraccountingformorethansixpercent of total revenue. The Company cur-rently employs 2,600 employees, including 650 engineers, across 20 facilities located aroundtheworld.Aeroflexoperatesthroughtwomaindivisions:AeroflexMicroelectronicSolutionsandAeroflexTestSolutions.Micro-electronic Solutions offers an array of micro-electronics and specialty products through 11 facilities and 1,600 employees, amassing US$361millioninsalesfor2013.TestSolu-tions has 1,100 employees and occupies two primary facilities located in Wichita, Kansas, and Stevenage, United Kingdom. The divi-sion produces specialized test and measure-mentproducts,whichcontributed$286mil-lioninsalesin2013(43%oftotalrevenue).

    Aeroflex Key Figures

    Headquarters Plainview,NY,USA

    Employees 2,6

    Revenue1 US$639,9m

    EBITDA1 US$122.5m

    Cash2 US$47.5m

    Deal Term Summary

    Total Deal Value US$1,460m

    Revenue Multiple1 2.3x

    EBITDA Multiple1 11.9x

    Aeroflexs Management

    Leonard Borow CEO

    John Adamovich, Jr. CFO

    1 LTM as of March 31, 20142 ExpectedBalanceSheetatclose

    2009 2010 2011 2012 2013Average Deal Value

    145.3 166.1 183.7 131.5 129.7No. of Deals 599.3 655.1 729.4 673.0 647.1

    $0

    $60

    $120

    $180

    $240

    $300

    $0

    $200

    $400

    $600

    $800

    $1,000

    2009 2010 2011 2012 2013

    $647.1$673.0$729.4

    $655.1$599.3

    $129.7$131.5

    $183.7$166.1$145.3$145.3

    $166.1 $183.7

    $131.5 $129.7

    Adjusted EBITDARevenue

    Rev

    enue

    (US

    $)

    Adj

    uste

    d E

    BIT

    DA

    (US

    $)

    Key Aeroflex Customers

    Aeroflex Historical Revenue & EBITDA (Adj.)

  • 28M&A International Inc. - we close deals in your industry

    4Highlighted TransactionsAEROSPACE & DEFENSE REPORTCommentary

    Cobhams Chief Executive Officer, BobMurphy, commented: The acquisition of Aeroflexisabsolutelyalignedwithourstra-tegic objective to obtainmore exposure togrowing, commercially-oriented end mar-kets that increasingly demand more data,connectivity and bandwidth. The scale and complementary nature of the combination enables our two technology businesses to unlock significant synergy benefits togenerate increased shareholder value, while supporting our customers even more effectively. Bringing these two companies together further underpins our objective to deliver sustainable organic growth.

    Strategic Rationale

    Strategic Fit

    High-Quality Asset

    Return on Capital

    Benefits from the Merger

    Both companies have similar styles of competition. Aeroflexsexposuretogrowingcommercially-drivenendmarketswouldhaveasignificantimpactonCobhams portfolio.

    With over 70 years of developing its core capabilitieswithintheconnectivitysector,Aeroflexhas positioned itself as a primary supplier to an enduring customer base.

    Within three years, the transaction will achieve a return that is greater than its cost of capital, assuminga9%post-taxweighted-averagecostof capital.

    U.S. Government

    International & Commercial

    59 41

    41%59%

    Defense

    Commercial

    2013 Cobham Pro Forma Sales Breakdown

    End Market

    U.S. Government

    International & Commercial

    67 33

    33% 67%

    Connectivity

    Other

    Connectivity

    Deal Rationale

  • 29M&A International Inc. - we close deals in your industry

    4Highlighted TransactionsAEROSPACE & DEFENSE REPORTEngility to Acquire TASC from KKR and General Atlantic

    Transaction Summary

    OnOctober28,2014,EngilityHoldings,Inc.(NYSE:EGL)(Engility)announcedtheyhaveentered into a definitive agreement to ac-quireTASC,Inc.(TASC)fromprivateinvest-ment firmsKKRandGeneralAtlantic in anall-stocktransactionvaluedatapproximatelyUS$1.1 billion, including the assumption ofnetdebtandthenetpresentvalueoftaxas-sets.TASCstockholders(i.e.,KKRandGen-eralAtlantic)will receive about 18.9millionsharesofEngility,representingapproximate-ly a 51%ownership stake in the combinedcompany on a pro forma, fully-diluted basis. Engility stockholders will receive a specialcashdividendofUS$11.40pershare,subjectto final adjustmentsat closing.The transac-tionisexpectedtocloseinthefirstquarterof

    2015. While the acquisition forms a premier government services provider, the combined company will continue to serve customers un-der the Engility and TASC brands due to the strong name recognition in their respective markets.TASCCEOJohnHyneswillbecomethe COO of the combined company.

    TASC Overview

    Since its foundation in 1966, TASC has be-come a leading provider of high-end mission-critical systems and specialized services for the intelligence community,USDepartmentofDefenseandUScivilianandgovernmentagencies.In2009,duetotighteningconflict-of-interest rules for defense contractors, Northrop Grumman sold TASC to KKR and

    General Atlantic for $1.7 billion. With over100 locations in the US and allied coun-tries, TASC employs approximately 4,000professionals, of which over 80% hold secu-rity clearances and 58% have top-secret or sensitive compartmented information (SCI)clearance. The company offers cybersecuri-ty, data analytics, enterprise transformation, intelligence missions and operations, ISR and systems engineering and integration, and principally serves the areas of aviation, countering weapons of mass destruction, geospatial intelligence, mobile applications, public safety and space. TASC has a particu-larly strong presence in the intelligence mar-ket,fromwhichitderives61%ofitsrevenue.Estimates for 2014 revenue and adjusted EBITDAareUS$1.1 billion andUS$90mil-lion, respectively.

    TASC Key Figures

    Headquarters Chantilly,VA,USA

    Employees ~4,000

    Revenue1 US$1,100m

    Adj. EBITDA1 US$90m

    Net Debt2 US$613m

    FundedBacklog3 US$385m

    Deal Term Summary

    Total Deal Value US$1,100m

    Revenue Multiple 1.0x

    EBITDA Multiple4 7.9x

    TASC Services

    Cyber OfferingsEnterprise TransformationIntegrated ISRData AnalyticsIntelligence Missions and OperationsSystem Engineering and Integration

    TASCs Management

    JohnHynes CEO

    Wayne Rehberger CFO

    1 EstimateforCY20142 Includesnetpresentvalueoftaxassets

    1 As of 09/30/2014 4 Afteradjustingfor~US$370minnetpresentvalueofacquiredtaxassets

    Key TASC Customers

    U.S. Government

    International & Commercial

    61 28 11

    11%

    28%

    61%

    Intelligence

    Defense

    Civil

    U.S. Government

    International & Commercial

    88 12

    12%

    88%

    Prime Contracts

    Subcontracts

    TASC End Markets TASC Contract Mix

    Source: Press releases, company websites, company presentations

    CIA DIA FAA HomelandSecurity

  • 30M&A International Inc. - we close deals in your industry

    4Highlighted TransactionsAEROSPACE & DEFENSE REPORTCommentary

    Engilitys CEO, Tony Smeraglinolo, com-mented, We expect this transaction toaccelerate our growth strategy of broad-ening our capabilities, diversifying our customer base, adding substantial scale to our business and increasing our address-able market. TASC enhances Engilitysexisting broad service offerings by addingcapabilities in intelligence analysis, space systems architect analysis, cybersecurity, ISRoperations,etc.Together,weexpecttooffer customers an even more comprehen-sive suite of high-quality offerings to meet their evolving missions and affordability requirements.

    Strategic Rationale

    Customer and End Market Diversification

    Creates Substantial Revenue Opportunities

    Cost Savings and Tax Attributes Significantly

    Increase Cash Flow

    Benefits from the Merger

    Highly-complementarycustomerfootprintsandlimited contract overlap.

    Engilitysstand-alonecustomermixincludes64%defense, 35% federal/civil and 1% intelligence; proforma,thecombinedentityhasadiversifiedmixof48%,24%and28%,respectively.

    Bringing Engilitys cost-effective model to TASCs targetmarketscreatesthepotentialtoimproverecompete and new-bid win rates.

    Acquiring TASC also provides numerous new offerings to Engilitys services portfolio, as well as enhancing current capabilities.

    Withimprovedscale,US$35mincostsynergiesareexpectedtoberealizedbyyearend2016,witharunrateofUS$50mby2018.

    Additionally,TASChas~US$1.4boftaxattributes,allowingforutilizationoftaxassetsforthemaximumannualtaxshield.

    Deal Rationale

  • 31M&A International Inc. - we close deals in your industry

    5Highlighted PlatformsAEROSPACE & DEFENSE REPORT

    Select Narrow-Body Jet Airliner Competitors Specifications

    Platform Wingspan Length Range Seat Count Unit Cost (US$m)

    Boeing 737 MAX 7

    117 10 110 5 3,800nm 126-140 $85

    Airbus A319neo

    117 5 111 0 4,200nm 124-156 $94

    Embraer E-195-E2

    1107 136 2 2,200nm 118-144 $60

    Bombardier CSeries

    Description

    The CSeries is a new family of single-aisle, twin-jet aircraft currently under development and in production by Bombardier. The pro-gram launched in 2008 and competes in the 100-to149-seataircraftmarketagainstoth-er narrow-body, medium-range jet airliners, including the Boeing 737, Airbus A320 and Embraer 195. Bombardier aims to compete by delivering wide-body comfort, including high overhead bin-per-passenger capac-ity and upsized windows, seats and aisles, while simultaneously offering economic ad-vantages, such as reduced cash operating cost and fuel burn. The company projects the CSeries will have a lighter airframe,

    15% cash operating cost and 20% fuel burn advantage compared with its Boeing and Airbus counterpart programs.

    Two models are currently available for order: the CS100 and the larger CS300, designed for lower- and higher-density operations, respectively. The CS100 is currently in early production and test phases with expectedentry-into-service by the second half of 2015.ThreeCS100prototypeshaveflowntodate,includingitsmaidenflightinSeptember2013. The CS300, still under development, is expected to followwith entry-into-serviceapproximatelysixmonthsaftertheCS100.

    Features

    Advanced Structural MaterialsAluminum fuselageAdvanced composite empennage, rear

    fuselage, nacelles and wings

    Advanced Flight Deck and AvionicsLargeLCDdisplaysanddualflight

    management system with RNP0.1 capability

    DualCursorControlDevices,datalinkwith full format printer, CAT IIIa autolandandfly-by-wirewithsidestickcontrols

    Optionalelectronicflightbag,CATIIIbcapability and head-up display

    Pratt & Whitney PurePower PW1500G EngineWorldshighestbypassratiocertified

    turbofanDouble-digit fuel burn reduction,

    50% noise reduction and reduced emissions

    Economic Advantages15% cash operating cost advantage20% fuel burn advantageOver 25% direct maintenance cost

    advantage

    Environmental Advantages20% CO2 emissions advantage over

    average50%lessNOxemissions255EPNdB;4xsmallernoisefootprint

    Interior Flexibility and Comfort

    Upsizedstorage,windowsandseatsNew Lavatories for Persons with

    Reduced Mobility

    Source: Airbus, Boeing, Bombardier, Embraer

    Bombardier CSeries Specifications

    Platform Wingspan Length Range Seat Count Unit Cost (US$m)

    CS100 115 1 114 9 2,950nm 108-125 $62

    CS300 115 1 127 0 2,950nm 130-160 $71

  • 32M&A International Inc. - we close deals in your industry

    5Highlighted PlatformsAEROSPACE & DEFENSE REPORTRecent Developments

    In February, Bombardier announced a re-vised expenditure estimate for the CSeriesprogram from the original assessment of US$3.4billion toUS$4.4billion,asa resultof an extra US$750 million in tooling anddevelopment costs and US$300 million ininterest and borrowing. The news trailed the announcements in January, revealing six-to nine-month delays for entry-into-service for both the CS100 and CS300, as well as a 1,700 employee layoff in the Bombardier aerospace division. The announced delay marked the fourth time the program hasencountered postponement. In March, the company froze salaries of approximately38,000 non-unionized employees in efforts toachieveprofitmargintargetsinthefaceofcostly delays.

    Increasing costs, layoffs, delays and slow orders have hindered the program, but it remains an integral part of Bombardiers growth plan, as the company anticipates sales from the CSeries jets will nearly dou-ble annual company revenue by 2020. The company is targeting 300 firm orders with20 to 30 customers by entry-into-service and claimed a total of 182 orders with 17 customersbytheendof2013.InFebruary2014, Bombardier announced firm orderstotaling 201 and remained confident it willhit its target number by delivery date.

    Others Electricity T&D totalRepubli 0 40 40 40Ilyushin Financ

    0 32 32 32Lufthansa

    30 0 30 0

    LCI 3 17 20 17

    Other 30 49 79 49

    0

    10

    20

    30

    40

    50

    60

    70

    80 79

    20

    3032

    40

    49

    1732

    4030

    3

    30Num

    ber o

    f Airc

    raft

    Ord

    ered

    CS100 CS300

    Republic Airways

    Ilyushin Finance Co.

    Lufthansa LCI Other

    2008 2013 20141. Prioritt 3.4 3.9 4.4

    2008

    2013

    2014 US$4.4b

    US$3.9b

    US$3.4b

    2009 2010 2011 2012 2013Average Deal Value

    50 40 43 15 34No. of Deals 50 90 133 148 182

    50 90 133 148 182

    0

    10

    20

    30

    40

    50

    60

    0

    40

    80

    120

    160

    200

    2009 2010 2011 2012 2013

    182

    148133

    90

    50 Ann

    ual O

    rder

    s

    Cum

    ulat

    ive

    Ord

    ers

    CSeries Orders

    Increasing Program Costs

    Stagnant CSeries Orders

  • 33M&A International Inc. - we close deals in your industry

    5Highlighted PlatformsAEROSPACE & DEFENSE REPORTTerminal High Altitude Area Defense (THAAD)

    Description

    The shortcomings of the PAC-2 missile, as an anti-ballistic missile system, created a need for a new system and resulted in the creation of the Terminal High AltitudeArea Defense (THAAD) missile program.The THAAD program is a highly-mobileand deployable anti-ballistic missile system capable of intercepting ballistic missiles in-side or outside the atmosphere during the terminalphaseofflight.Thesystemutilizeshit-to-kill technology in the form of kineticenergy to eliminate incoming threats and remaining debris. The ability to accept in-formationfromotherexternalsources,suchas Aegis and satellites, and to coordinate with other missile systems increases the coverage area, providing augmented levels of effectiveness. The U.S. Army operatesthe THAAD system, the Missile DefenseAgencymanagesthesystemandLockheedMartin acts as the prime contractor and sys-tem integrator.

    Components

    Airframe: Single-stage unit utilizing a nose-mounted infrared (IR) seeker and a solid-fuel motor. The shroud assembly protects the IR seeker during flight and separatesonceoutsidetheatmosphere.Asahit-to-killvehicle,THAADdoesnotcarrynoremploya warhead.

    Launch System: Missiles are housed in canistersmountedontherearofaOshkoshM1120HEMTT10-tontruck.Eachtruckcar-ries the payload capacity of eight THAADmissile rounds.

    Electronics - Guidance: Initially, an inertial measurement unit and an integrated avion-icsprocessorprovidesflightcontrol for themissile. The combined systems provide missile guidance, navigation, control, data communication, event sequencing and pro-cessing functions. Once the shroud assem-bly disengages, THAAD uses an infraredsensor for terminal homing.

    Specifications

    Length 19ft.(5.8m)

    MaxAltitude 95mi(150km)

    MaxRange 125mi(200km)

    MaxSpeed 1.7mi/s(2.8km/s)

    Target Intercept Range

    120mi(195km)

    Target Intercept Altitude

    90mi(145km)

    Kill Mechanism Kinetic Kill Vehicle

    Timeline of Development

    2000 ContractawardedtoLockheedMartin

    2006 Firstandsecondbatteriesawarded

    2008 Firstbatteryactivation

    2009 Second battery activation

    2011 Third and fourth batteries awarded

    2011 Firstinterceptordelivery

    2011 FirstForeignMilitarySale(FMS)

    2012 50th interceptor delivered

    2012 Third battery activation

    2014 2015 2016 2017 2018 2019 2020 2021 2022Average Deal Value

    313.200.000 338.400.000 249.400.000 279.700.000 300.000.000 300.000.000 300.000.000 300.000.000 300.000.000No. of Deals 566 447 490 464 470 470 470 470 470

    $0

    $100

    $200

    $300

    $400

    $500

    $600

    2014 2015 2016 2017 2018 2019 2020 2021 2022

    $470$470$470$470$470$464$490

    $447

    $566

    Bud

    get (

    US

    $m)

    R&DProcurement

    Budget

  • 34M&A International Inc. - we close deals in your industry

    5Highlighted PlatformsAEROSPACE & DEFENSE REPORTElectronics - Fire Control: In the initial stage,externalsources,suchassatellites,provide target cueing for the THAADmis-sile system. The system then uses internal processestotrack, identifyandassesstheproperimpactpointandkillapproach.Iftheinitialengagementisunsuccessful,THAADis designed to allow a second attempt.

    Propulsion System: In the initial stage, the missile employs an Aerojet single-stage solid-fuel rocket motor and thrust vectorcontrols for propulsion and maneuvering. During the terminal phase and separation of shroud assembly, divert-and-attitude-con-trol-system (DACS)maneuvers the kill ve-hicle. DACS utilizes four divert thrusters to steer the missile to the point of interception.

    THAAD Outlook

    After years of development and testing, the THAADprogramheadstowardsfullprocure-ment. With THAADs unique skillset andcapabilities,THAADVicePresidentandPro-gramManageratLockheedMartin,MathewJoyce, continues to see strong interest from aroundtheglobe.InDecember2013,Lock-heedMartinreceivedanawardforaUS$3.9billion production contract. The contract will produce110 interceptors for theU.S.Army,along with interceptors and ground hardware fortheUAE.InJune2014,theSouthKoreanmilitarybegananalyzingTHAADanditsben-efitsinresponsetoheightenedtensionwithintheregion.TheTHAADmissiledefensesys-temcouldplayakeyroleinimprovingSouthKoreas missile defense program and help alleviateconcernsbeforetheUStransitionscommand of the countrys wartime defense to South Korea.

    Interceptor Production Forecast

    User 2014 2015 2016 2017 2018 2019 2020 2021

    U.S. Army 27 42 36 36 36 36 36 36

    Foreign 0 0 25 25 25 25 25 25

    Total 27 42 61 61 61 61 61 61

    Source:MarketResearch

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    5Highlighted PlatformsAEROSPACE & DEFENSE REPORTNorthrop Grumman Global Hawk

    Description

    The Global Hawk is a high-altitude, long-endurance unmanned aerial vehicle (UAV)with intelligence, surveillance and reconnais-sance (ISR) capabilities. Primarily used bytheU.S.AirForceandNavyforavarietyofoperations,includingpeacekeepingmissionsandfull-scalecombat,theGlobalHawkisde-signed to provide military commanders with near real-time ISR and detection of moving targets over a large geographical area for battle management, targeting and situational awareness. With Northrop Grumman as the prime contractor, the platform entered devel-opment and limited production in 2001 with theRQ-4Amodel. In 2011, theRQ-4Awasretired as the next generation RQ-4B wasdeveloped, featuring enhanced open-system architecture, increased AC power for sen-sors, longer wingspan and fuselage, larger payload capacity, improved fuel capacity and increasedgross takeoffweight.TheRQ-4Bisproducedinthreeconfigurations:Block20,30 and 40.

    Global Hawks Battle With the U-2

    The U-2 is a one-manned, ultra-high- altitude reconnaissance aircraft manufac-tured by Lockheed Martin and primarily operatedbytheU.S.AirForceandtheCen-tral Intelligence Agency. Although it is over 50 years old, the aircraft has been upgraded with key sensors, including electro-optical/infrared cameras