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    Aerospace, Defense & Government Contracting Q3 2022

    Q3 2022 Aerospace Defense Government 

    Industry Trends

    United Airlines Invests in Flying-Taxis

    United Airlines continues to invest in “flying-taxi” manufacturing companies with its $15 million investment in Eve Holdings Inc. Eve manufactures electric aircraft suitable for four passengers and is backed substantially by Embraer. United hopes to provide “flying-taxi” services with an estimated cost to consumers relative to an Uber Black; however, Eve’s aircraft have not been fully approved by regulators to fly passengers. The airline expects its first deliveries from Eve as soon as 2026.1

    Airlines Facing Shortage of New Jets

    Boeing and Airbus are months behind on new jet deliveries as they struggle with supply chain difficulties. Airplane manufacturers will continue to be months behind schedule as they race to meet deferred delivery targets from the pandemic. The effects on their customer airlines are compounded by a rebound in consumer flight demand, a continued shortage of pilots, and a shortage of spare parts for their existing planes.2

    Continued Resolution Keeps Funding Through December

    In late September, the House passed the President's stopgap funding bill giving lawmakers more time to pass the FY2023 funding legislation. However, under the resolution, the Pentagon cannot start programs and can only initiate funding from the 2022 fiscal year. A significant difference in the discussions is defense spending, with the Senate Appropriations Committee seeking $30 billion more than the Biden administration's request of $762 billion supported by the House Committee.3

    New Bill to Enhance DoD Replenishment of Stockpiles

    The Securing American Acquisitions, Readiness and Military Stockpiles Act would grant the Department of Defense greater buying power to refill defense stockpiles that have been tapped when supporting an ally or defending against a foreign adversary. At present, this bill would expedite the contracting process of weapons and materials that the DoD has tapped in the effort to aid Ukraine. In doing so, the DoD would have non-competitive procedures for contract awards.4

    $985 Million Hypersonic Award Goes to Raytheon

    In September, the Pentagon awarded Raytheon Technologies the $985 million contract to continue developing hypersonic cruise missiles, beating out Boeing and Lockheed Martin for the contract. The contract gives Raytheon an advantage in the race for the valuable contracts that will be awarded after the technology is fully developed. The United States, in collaboration with Australia, is currently racing against China to develop the next-gen hypersonic attack cruise missiles.5

    Largest Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • Vectrus, Inc.
    • V2X, Inc.
    • $860.62
    • Sensor Systems, Inc.
    • Electronic Technologies Group, Inc.
    • $165.35

    Other Financial Buyer Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • Mesotech International, Inc.
    • Westbourne Capital Partners
    • n/a

    Other Strategic Buyer Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • Airborne Response LLC
    • Safe Pro Group Inc.
    • n/a
    • SI2 Technologies, Inc.
    • Antenna Research Associates, Inc.
    • n/a
    • NuSpace, Inc.
    • PCX Aerostructures, LLC
    • n/a
    • Advanced Acoustic Concepts, LLC
    • Thales Defense & Security, Inc.
    • n/a
    • TAC Air, Inc.
    • Signature Flight Support Corporation
    • n/a
    • Advanced Composite Structures, LLC
    • Gelder Aerospace, LLC
    • n/a
    • Giga-tronics Incorporated
    • Giga-tronics Incorporated
    • n/a
    •  

     

    Source S&P Capital IQ as of 10/11/2022 and PCE Proprietary Data

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    Data Assumptions

    This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

    Glossary

    EBIT - Earnings Before Interest and Taxes
    EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
    LTM - Last Twelve Months
    TEV - Total Enterprise Value

    Sources:

    1. Sider, A. “United to Invest $15 Million in Flying-Taxi Maker Backed by Embraer.” Wall Street Journal, 8 September, 2022.
    2. Katz, B. & Tangel, A. “Airlines Face a Shortage of New Boeing, Airbus Jets.” Wall Street Journal. 3 October, 2022.
    3. Shelbourne, M. “Biden Signs Continuing Resolution Keeping Government Running Through Dec. 16.” U.S. Naval Institute News, 30 September, 2022.
    4. Thropp, C. “New Bipartisan Bill Seeks to Expedite DOD Procurement Processes to Refill Stockpiles.” ExecutiveGov, 13 September, 2022.
    5. Stone, M. “Raytheon $985 mln hypersonic award puts them far ahead in contracting race.” Reuters, 22 September, 2022.

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