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01 Dec 22. LMI acquires Synaptech to enter fast-growing space business. LMI, a consulting firm to the U.S. government, agreed to acquire Synaptech, a supplier of AI, software and and operational analysis services, to enter the commercial space industry. Terms were not disclosed.
The acquisition of Synaptech will help LMI in its mission of “growing market access” in the space sector, LMI spokesperson Robin Milton told Defense News. The company viewed Synaptech as a promising acquisition due to its clients, which include the Space Force, and its modeling and simulation capabilities, along with its proprietary Raptr software.
“Chartered by President Kennedy in 1961 at the dawn of the space race, it is fitting that LMI is now entering the space marketplace to support a renewed space race where adversaries seek to disrupt and disable our dominance in space,” CEO Doug Wagoner said in a statement.
Co-founders Zac Gorrell and Elias Peroulas, Synaptech’s CEO and CTO, respectively, will stay on with LMI as the leaders of the company’s space business. Some 60 Synaptech employees will also continue to work for the company under LMI.
By moving into the space sector, LMI said it’s seeking to provide input and technologies to all domains of the armed forces.
“To help our customers innovate at the pace of need, one must understand all discreet and interdependent operational domains from the sea floor and sea surface, to ground, air, cyber, and space,” Wagoner said. “The acquisition of Synaptech enables LMI total multi-domain awareness at scale.” (Source: C4ISR & Networks)
23 Nov 22. The surge in aerospace and defence (A&D) mergers and acquisition activity that we saw last year melted away in the first half of 2022 amid rising geopolitical and macroeconomic uncertainties, sharply higher interest rates, and heightened regulatory scrutiny on very large deals. The number of transactions in the first half of the year declined to an annualized rate about 19 per cent lower than for the whole of 2021, according to a recent KPMG International A&D Mergers and Acquisitions report.
Will dealmaking remain less frenetic while the cost of money stays high?
Quite possibly, but we expect many smaller technology-focused deals in the A&D industry in the coming months as original equipment manufacturers (OEMs) look to fill gaps in their strategic product and service offerings and boost their capabilities.
To date, deal activity has largely been concentrated among companies specializing in unmanned aerial vehicles (approximately 20 transactions in the past 18 months), surveillance, jamming technology, communications, and identification and cyber security.
And, with democratic governments encouraging A&D companies to nearshore parts of their supply chain ecosystem, some interesting domestic and cross-border M&A opportunities are likely to emerge, particularly among Tier 2 and 3 suppliers. In larger transactions, more government oversight has been occurring, with an increased focus on protecting national security interests. This has been observed in the U.S., U.K., and Australia in particular, and may also be undertaken in Canada pursuant to the Investment Canada Act and related regulations.
In civilian aerospace, Tier 2 and 3 suppliers that are still under considerable financial stress may well seek a Tier 1 or 2 company to rescue them through an acquisition. Several OEMs have already been supporting financially stretched suppliers through the pandemic.
Think outside the box
M&A deals aren’t the only way to add technological capabilities. There are also opportunities to form ties with tech start-ups. Increasingly, A&D companies are focused on partnerships, joint ventures, and alliances to spread the risk and leverage shared technology.
The product life cycle historically has been 20 years long. But, given the advancements in technology and country-specific decarbonization targets, the future is much more difficult to predict. With that in mind, A&D companies really should think outside the box for ways to reduce their exposure and hedge their bets.
For example, joint ventures are already emerging to develop batteries for urban air mobility and electric aircraft. Aeroengine makers are teaming with OEMs on the electrification of aircraft and engine systems and advanced propulsion technologies, as well as partnering with energy companies to find more sustainable aviation fuel (SAFs) solutions.
The race to develop sustainable propulsion systems is well underway.
Electrification, using either batteries or hydrogen fuel cells and hydrogen combustion using gas turbines, were identified as three potential alternative propulsion technologies with the greatest potential to reduce aviation’s climate impact in the World Economic Forum’s Target True Zero new report.
Given the mounting pressure to reduce the climate impact of aviation, sustainability in the defence sector and transitioning to net zero were key themes during this year’s Farnborough International Airshow. Sustainability will fuel future partnerships as no single stakeholder in the A&D industry can achieve net-zero carbon emissions on their own. Other key themes from Farnborough included smart manufacturing and hyper-scaling within the industry to accelerate change.
Private equity firms are often the catalysts of these kinds of deals, the kind that will shape the future of the industry.
In the U.S., which comprises the lion’s share of M&A in the A&D sector worldwide, the value of PE-related transactions totalled US$19.3 bn in the 18 months ended June 30, while special-purpose acquisition company (SPAC) deals came to a virtual standstill partly from both regulatory scrutiny and the recent stock-market rout.
SPACs, also called blank cheque deals, are shell companies set up by investors to raise money through a public offering with the goal of buying a private business. There’s a limited time to complete the deal, and if the deadline isn’t met, the SPAC is liquidated, and the money is returned to investors.
Last year in the U.S., SPACs were an important conduit for emerging space companies to raise capital. However, if the space subsector is going to expand more rapidly, then it may need to follow the more conventional initial public offering (IPO) route.
Change brings opportunity
The many changes, large and small, over the past few years will undoubtedly be felt in the industry for some time to come. While it’s a difficult environment, it’s also laden with opportunities for dealmaking provided you can be resilient, agile, and flexible.These three traits have always characterized dealmakers and have never been more useful – or necessary – than they are now. The world economy is becoming more divided, and manufacturers will need to adapt. M&A is one way of getting ahead of the curve. (Source: Google/KPMG)
02 Dec 22. Anduril has raised nearly $1.5bn in the second-biggest venture capital round of the year in the US, marking a milestone for young tech companies trying to break into the notoriously difficult field of defence procurement. Anduril said the investment valued it at $7bn, excluding the new cash it is raising, up from $4.2bn 18 months ago. It comes at a time when giant investment rounds, which were a feature of the recent venture capital boom, have all but dried up, while many start-ups struggle to avoid “down rounds” that force them to accept lower valuations. Anduril was founded five years ago by Palmer Luckey, who sold his previous start-up, virtual reality company Oculus, to Facebook for $2bn at the age of 21. In an interview with the FT, Luckey said he had set out to build a large defence company based around new technologies such as AI and drones because many Silicon Valley companies, under pressure from their workers, had turned their back on the Pentagon. “The big tech companies in the US were largely refusing to work with the [Department of Defense],” he said. “You have all this incredible technology talent that’s just inaccessible to the DoD. There’s never been a point in US history where that’s how things were.” Tech start-ups have struggled to sell to the military because of the defence industry’s long purchasing cycles and the challenge of earning enough trust to win sizeable contracts. “They were laughed out of Silicon Valley, a lot of people didn’t believe it could be done,” said Katherine Boyle, a partner at Andreessen Horowitz, an Anduril investor. “The nature of warfare has changed fundamentally and the [large defence contractors] are not going to be able to meet the procurement needs.” In the strongest sign yet that the Pentagon is turning to the software and AI capabilities of newer defence companies, Anduril earlier this year won a contract from the US Special Operations Command worth nearly $1bn to act as a systems integrator on a counter-drone project. Along with a series of contracts with different branches of the US military, Luckey said the company works with “half a dozen Nato allies” and has “hundreds of ms” of dollars in annual revenue. Anduril is known mostly for autonomous systems such as drones, as well as surveillance towers used for border security. Most of its engineers work on its software platform Lattice, which pulls together data from many different surveillance and weapons systems, most of which are not built by the company. Russia’s invasion of Ukraine has changed attitudes in Silicon Valley and made many more tech start-ups willing to consider working with the Pentagon, Boyle said. However, there is still a heated debate in tech circles about how far companies that were not set up purely to work on defence should go, particular when it comes to offensive weapons. Luckey said Anduril did not draw the line at building weapons but would not use facial recognition software, because the technology could never be reliable enough to trust in life-or-death situations. He rejected calls for a ban on autonomous weapons, arguing that always requiring a “human in the loop” to make the ultimate decision to fire would leave the US and its allies at a disadvantage to countries that used fully robotic weapons. Instead, he called for clear lines of responsibility over the decision to employ autonomous weapons in particular situations, rather than actually fire them, but added that only democratically elected leaders should set the rules. “You shouldn’t want me to make that decision because you shouldn’t want corporate executives setting US foreign policy or military policy,” he added. “We should just be the dumb computer boys who make these things.” The latest investment, which takes Anduril’s total fundraising to $2.2bn, was led by Valor Equity Partners. The company was reported earlier this year to have started the process of raising the round. In the biggest VC round of the year, Elon Musk’s space company, SpaceX, raised nearly $1.7bn in June. Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. (Source: FT.com)
29 Nov 22. Elbit Systems registers $1.34bn in revenue in third quarter of 2022. As of 30 September, the company’s backlog of orders totalled $14.7bn. Israeli defence electronics firm Elbit Systems has reported that its revenue in the third quarter (Q3) of 2022 dropped to $1.34bn, from $1.36bn in Q3 2021. The company’s non-GAAP gross profit amounted to $337.9m in the quarter, which is 25% of revenues. Its GAAP gross profit was $326m.
Non-GAAP operating income was $84.3m, compared to $123.0m in the same quarter a year ago, and GAAP operating income was $73.4m.
In Q3, non-GAAP net income attributable to the company’s shareholders was $62.6m, compared to $103.1m. The company noted that its net income was reduced by nearly $20m due to net expenses associated with its stock price linked compensation plans.
Non-GAAP diluted net earnings per share attributable to the company’s shareholders were $1.40 for the quarter, as compared to $2.33 in the same quarter the year prior.
Elbit Systems president and CEO Bezhalel (Butzi) Machlis said: “The current environment presents opportunities and challenges for Elbit Systems.
“Elevated geopolitical tensions and growing defence budgets have created multiple opportunities and we are increasing investment in business development to realise the potential from these trends.”
The company said its backlog of orders reached $14.7bn at the end of September. Nearly 75% of that has been attributed to orders from outside Israel.
Machlis added: “Our working assumption is that supply chain and labour inflation pressures will gradually subside from the second half of 2023.
“We continue to invest in Elbit Systems’ portfolio of advanced technological capabilities including unmanned systems, C4I, EW, maritime solutions, and precision munitions.
“The significant orders received in 2022 have highlighted the relevance of our portfolio to our customers and support future growth prospects.”
Earlier this month, the company’s UK subsidiary reached a partnership with Draken Europe in the area of uncrewed aerial systems. (Source: army-technology.com)
28 Nov 22. Leonardo DRS Announces Closing of Merger with RADA. Leonardo DRS, Inc. (“Leonardo DRS”, or the “Company”), a leading mid-tier defense technology provider, today announced the successful completion of the all-stock merger between Leonardo DRS and RADA Electronic Industries Ltd. (“RADA”) to become a combined public company (the “Combined Company”). As previously disclosed, RADA shareholders will retain 19.5% ownership in the Combined Company with Leonardo DRS’s parent company, Leonardo S.p.A., (MIL: LDO), owning the remaining 80.5%. Leonardo DRS’s stock will be listed on NASDAQ and the Tel Aviv Stock Exchange (“TASE”) under the symbol “DRS” with RADA’s existing stock symbol converting to the Leonardo DRS symbol effective at the opening of NASDAQ trading on November 29, 2022 and TASE trading on November 30, 2022.
The Combined Company will be aligned to fast growing segments of the U.S. Department of Defense (“DoD”) budget with market leading positions in advanced sensing, force protection, network computing, and electric power & propulsion. Further, the Combined Company’s mid-tier position provides meaningful scale coupled with agility to respond to customer needs with affordable and differentiated solutions. Pro forma revenue and Adjusted EBITDA in 2021 for the Combined Company was approximately $2.7bn and $305m, respectively.
“We look forward to bringing Leonardo DRS’s mid-tier strength to the public markets with the addition of RADA’s leading tactical radar capabilities,” said William J. Lynn III, Chairman & CEO of Leonardo DRS. “Leonardo DRS’s broad exposure to fast growing segments in the defense market and market leading positions in advanced sensing, force protection, network computing and electric power & propulsion make us a unique defense contractor with a compelling growth outlook, margin expansion capabilities and a largely unlevered balance sheet.”
“We are pleased to have received strong shareholder support for this transaction,” commented Dov Sella, CEO of RADA. “It has always been our goal to maximize shareholder value, and the RADA team and Board believe this merger represents an excellent outcome for the Company. The RADA team looks forward to continuing to penetrate the tactical radar market within the strong Leonardo DRS platform.”
In celebration of the transaction and the first trading under the DRS ticker symbol, the Leonardo DRS leadership and broader management team, led by CEO William J. Lynn III, will ring the Nasdaq closing bell on November 29, 2022 at 4:00 pm. The bell ringing ceremony can be seen live on U.S. financial network television and on Nasdaq.com.
25 Nov 22. Czechoslovak Group acquired a majority share in Fiocchi Munizioni. Czechoslovak Group (CSG) announced the acquisition of a 70% stake in Fiocchi Munizioni, a global leader in premium and super premium small caliber ammunition. CSG will partner with the current shareholders, the Fiocchi family and Charme Capital Partners, each retaining a minority stake, to pursue the continued growth path envisaged
Founded in 1876 in Lecco, Italy, Fiocchi Munizioni designs, manufactures and sells premium and super-premium small caliber ammunition for shooting sports (brand of choice for top athletes, including Olympic games winners with 33 medals), hunting and law enforcement, under the iconic Fiocchi, Baschieri & Pellagri and Lyalvale global brands. Fiocchi Munizioni is one of the few global players with three fully vertically integrated industrial and commercial platforms in Italy, the US (where Fiocchi has been directly present for more than 40 years) and the UK. Fiocchi has a wide range of proprietary product and process technologies in critical areas, including rare primer production capabilities, developed through a continuous in-house proprietary innovation activity. Fiocchi Munizioni is expected to record consolidated revenues exceeding Euro 380m in 2022 and employs more than 1.300 people worldwide.
CSG, based in Prague, Czech Republic, is a diversified industrial group active in five strategic business segments, aerospace, defense, automotive, railways and business projects, where it operates at a global level. CSG is 100% controlled and led by Michal Strnad, who has transformed it into the most relevant Czech industrial group with a strong international footprint. CSG employs more than 8.000 people worldwide and it owns and manages a diverse portfolio of industrial and trade companies across the civil and defense sectors. Over the years, CSG has entered various strategic partnerships with top-tier European and US multinational companies including General Dynamics, Siemens, Stadler, Raytheon, Lockheed Martin, Boeing, Airbus, Nexter Systems and Rheinmetall.
The transaction envisages the acquisition of a 70% stake in Fiocchi Munizioni by CSG in partnership with the Fiocchi family and Charme Capital Partners, that will maintain the remaining 30% stake thus granting continuity with the Company’s 146 year-long history and with the recent development achieved since the acquisition by Charme Capital Partners at the end of 2017. CSG is strongly committed to the continued growth of Fiocchi Munizioni over the coming years, with further international development supported by new investments in all the current factories that will also drive new hirings.
Michal Strnad, Chairman of CSG, commented on the transaction: “This transaction marks a major milestone for the entire CSG, as the investment in Fiocchi is the largest financial investment in the history of our group. Today we become the majority shareholder and partner of a global leader in the field of small-caliber ammunition, with a solid presence in NATO countries. Fiocchi Munizioni, like CSG, has been built by several generations of the Fiocchi family. We consider the Fiocchi family’s commitment to the management and development of the company to be a strong asset and we want to further develop the company in close partnership with them. We also deeply appreciate and respect what Charme Capital Partners has been able to achieve over the last five years, and we will treasure its precious legacy going forward thanks to its reinvestment as a minority shareholder.”
Petr Formánek, Member of the Board of Directors of CSG Group and Head of M&A, said: “Joining forces with Fiocchi is the result of CSG’s long-term strategy. We are interested in acquiring companies operating globally that are oriented towards Western Europe and the US, with a strong product and market position, and within one of our group’s core industries.”
“This acquisition is the basis of a new division of CSG that will be focused on small-caliber ammunition and that we have called CSG Ammo+,” added David Štěpán, Member of the Board of Directors of CSG and Investment Director for CSG International Projects.
Stefano Fiocchi, Fiocchi Munizioni Chairman and representative of the Fiocchi family, added: “Our family has supported Fiocchi Munizioni since 1876, when it was founded by my ancestor Giulio Fiocchi. A few years ago, we decided to open our family business with a new partnership with Charme Capital Partners to foster Fiocchi Munizioni’s growth, implement a modern managerial approach and eventually strengthen our leadership position globally. We are grateful to Charme Capital Partners for the success that we have built together. Today we welcome a new strategic partner that will be able to guide Fiocchi Munizioni to new achievements. I believe that my family and Michal Strnad share a similar entrepreneurial culture and a true desire to grow the business of Fiocchi Munizioni and CSG. We are looking forward to the future together with the CSG.”
Maurizio Negro, Fiocchi Munizioni CEO, commented: “The partnership established between Charme Capital Partners and the Fiocchi family has been instrumental in achieving outstanding growth and international expansion over the last five years. This was also made possible thanks to all the people that work for Fiocchi Munizioni and share a true passion for what we do every day. We are now pleased to become part of CSG, with whom we share a deep industrial and international culture. I am sure that this new chapter in Fiocchi Munizioni’s history will be marked by continued solid growth and by a further strengthening of our leadership position worldwide.” (Source: PR Newswire)
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TCI International, Inc., is a wholly-owned subsidiary of SPX Corporation. TCI provides turn-key solutions for spectrum management and monitoring, direction finding, geolocation and communications intelligence to civilian, government, military and intelligence agencies as well as antennas for communications and high-power radio broadcasting. TCI is headquartered in Fremont, California, USA. For more information, visit www.tcibr.com.
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