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David Jasmund

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Industry Trends

2023 Ends with a Surge in Government Contracting & Defense M&A Activity

For nearly two years, the defense contracting industry’s M&A activity was stymied by supply chain challenges and escalating acquisition costs from increased regulations. However, the latter part of 2023 saw increased deal activity as defense companies focused on inorganic growth, boosting deal-making prospects for 2024. Deal activity is likely to be below the-$100 million range, mirroring the trend observed in the second half of 2023, where 86% of deals fell within this category.1

Q4 Federal Contracting Momentum Set to Drive 2024 Gains

In 2023, Federal agencies received funding earlier than usual. As a result, agencies planned to spend roughly 30% of their annual budget in the fourth quarter. The spending surge, driven by demands for advanced technology, increased investment in climate initiatives, and IT system upgrades, creates booming opportunity to win bids from government contractors. However, not all agencies feel the same pressure, as some funding expires at the end of December while others don't.2

A Triumph for Airbus as Deliveries Surpass Target

Airbus soared past their goal of 720 annual airliner deliveries. The company delivered 728 airliners in 2023, despite production challenges due to material and parts shortages. Airbus’s strong delivery performance underscores the high demand for the company’s airliners, and the critical role its network of parts suppliers plays in its success. Analysts, however, remain unconvinced that Airbus will be able to meet its 2024 delivery target with its production still hampered by materials and parts shortages.3

Tense Times Trigger Surge in Defense Contractor Production

As the U.S. government needs more weaponry and munitions, several U.S. defense companies anticipate a lucrative 2024. The production of Patriot interceptors is slated to increase, resulting in a substantial uptick in sales. This growth is driven by concerns over Russian and Chinese military actions and the need to support allies in the Middle East. As a result, the U.S. defense industry is experiencing a major increase in its stock values.4

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • KTI A.O.G.
  • Flightcheck Commercial Aviation Services, LLC
  • n/a
  • Quick Turn Engine Center, LLC
  • FTAI Aviation Ltd. 
  • n/a
  • Aerial Delivery Solutions, LLC
  • Life Support International, Inc.
  • n/a
  • P3 Technologies, LLC
  • Graham Corporation 
  • n/a
  • Unitech Aerospace Company
  • Charger Investment Partners LP
  • n/a
  • Iris Automation Inc.
  • uAvionix Corporation
  • n/a
  • Alto Technologies, LLC
  • Heads Up Technologies, Inc.
  • n/a
  • Pax Aero Solutions LLC
  • AIRtec Inc.
  • n/a
  • Lancair International, Inc.
  • JetEXE Aviation Corporation
  • n/a
  • HAECO Cabin Solutions, LLC
  • Zim Aircraft Seating Gmbh
  • n/a

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • -
  • -
  • n/a

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • -
  • -
  • n/a

 

Source S&P Capital IQ as of 1/16/2024 and PCE Proprietary Data

PCE Transactions

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David Jasmund

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Eric Zaleski

Chicago Office

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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. 1. Lyons-Burt, C. “GovCon M&A Deals ‘Rebounding’ After Slow Period - Dispatch from 2023 Baird Conference.” GovCon Wire, November 16, 2023.
  2. 2. Miller, J. “Busy federal fourth quarter to bleed into just as crazy first quarter of 2024.” Federal News Network, July 4, 2023.
  3. 3. Hepher, T. “Airbus 2023 deliveries reached mid-730s, beating target of 720 -sources.” Reuters, January 2, 2024.
  4. 4. Stone, M. “Wars raise profit outlook for US defense industry in 2024.” Reuters, December 18, 2023.
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